In the week since our last edition of What’s Affecting Oil Prices, Brent prices rose as expected to average $66.01/bbl.
For the upcoming week Stratas Advisors expect Brent prices to stay strong, averaging $67/bbl. However, the EIA’s Petroleum Supply Monthly report due out on Feb. 28 poses a risk to prices if supply growth is higher than expected.
Geopolitics will be a neutral factor in the week ahead with little news on the geopolitical front that is likely to influence prices.
The dollar will be a neutral factor in the week ahead as fundamental and sentiment-related drivers continue to have more impact on crude oil prices. Last week crude oil and the dollar both rose slightly, and analysts expect the same dynamic to play out in the upcoming week.
Trader Sentiment: Positive
Trader sentiment will remain a supportive factor for crude oil prices in the week ahead. While managed money net long positioning has fallen back over the last few weeks, technicals indicate that there is still room for an upside run and overall sentiment remains positive.
Supply will be a negative factor in the week ahead as U.S. rigs and production continue to increase. Wednesday’s Petroleum Supply Monthly will reveal how much crude grew in December after hitting new highs in November.
Demand remains a positive factor and is generally strong although with product stocks draining, demand is not providing as much support to margins and thus crude as would be hoped.
Refining margins generally increased last week. Mediterranean and Asian margins are generally at or above the five-year seasonal average while Brent and West Texas Intermediate indexed margins are sagging. Despite the minor improvement in margins, runs are unlikely to see much of a change, thus limiting any additional support for Brent.