Last Week Oil Market Data
Looking back at last week oil market data and news, one can clearly see that oil prices are set for another fall this week following a sharp decline last week after reaching $58/bbl on Tuesday.Â
Last Week Brent Crude Oil Price
According to Baker Hughes rig count service, last week U.S. rig count increased by 7 rigs up to 665 rigs. U.S. oil rig count was up by 4 rigs to 529 rigs which is 13 rigs up from the same period last year. Around 3 of the added rigs last week was gas rigs, rising gas rig count up to 135 rigs which is 13 rigs down from the same period last year. At its current level and with the continuous increase in the past weeks, U.S. oil rig count is now a critical parameter for the sustainability of oil prices around $55/bbl.
In a similar trend, Canada rig count was up by 48 rigs to 205 rigs according to Baker Hughes rig count report. It is clear that at the current oil price level, many oil producers are encouraged to resume drilling activities. A trend which poses a threat to the sustainability of oil prices around $55/bbl as more oil will come online. Adding to the current fears that few of OPEC’s members may not stick to the oil output cut deal and could start to increase their oil output soon, rising rig count in countries which are not part of the OPEC and non-OPEC output cut deal such as the USA and Canada will definitely be the reason for oil prices to fall below $50/bbl this year.
In addition to the increase in US rig count which weighed on oil prices, US crude oil production increased last week after two weeks of decline. According to the Energy Information Administration (EIA)’s Weekly U.S. Field Production of Crude Oil, US weekly crude oil production increased by 4,000 to 8,770,000 bbl/day to the week ending December 30.Â
Adding to the pressure on oil prices, rising US dollar as a result of last month’s Fed rate hike also weighed on oil prices last week and it is expected to continue to do so to the unforeseeable future as the Feds signaled more rate hikes in 2017. In fact, the strengthening US dollar was the main reason for the sharp fall in oil prices last week from around $58/bbl down to $55/bbl on Tuesday. And despite a sharp fall in US crude stockpile by 7.1 million bbl as reported by the EIA last week, oil prices only slightly recovered as prices were under a huge pressure from a stronger US dollar.
This Week Oil Price Forecast:
Based on last week oil market data and news, crude oil prices are expected to remain under pressure and could fall slightly this week. The increase in US rig count and oil production and the strengthening US dollar are expected to put a huge pressure on oil prices and could drive it down by around 1 to 3 percent. this weekÂ
Oil Price Forecast for This Week
More downward pressure to oil prices is coming from the news that Iran increased its oil exports despite efforts by other OPEC’s members to cut oil output in order to help end the global glut. It is believed that Iran has sold over 13 million barrels of its oil that is held on tankers at sea. The second biggest OPEC member is exempted from the OPEC output cut deal which allows it to increase its oil output to regain its lost market share. The move by Iran to increase its oil output will pressure oil prices despite the fact that the country is exempted from the OPEC output cut deal.
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Remark: The expectation of oil prices’ direction in this commentary are based on the oil market data and news up until the time of writing this commentary. As the week starts, new data and news are reported and could influence oil prices differently. Therefore, the direction of oil prices cloud be different from what was expected here. It is important to stay updated with oil market data and events as they occur.
