At the beginning of last week Stratas Advisors expected that the price of Brent crude would move toward $44, but would not break that mark. The expectation was based, in part, on the view that there would be another build in crude inventories in the U.S., which would put downward pressure on the price of Brent crude. In actuality, the price of Brent crude started the week at $43.10 then dropped to $42.91 on Monday before strengthening throughout the week to close the week at $45.11.
The lack of an agreement coming out of the meeting of oil producers in Doha proved to have limited impact since the outcome matched the market expectations. The upward movement in the price of Brent crude oil was supported by the significant drawdown in inventories of distillate fuel oil in the US (decline of 3.54 million barrels) coupled with a report from the Labor Department that indicated jobless claims in the U.S. had dropped to 247,000 for the week of April 16, which is the lowest since the November of 1973. Additionally, jobless claims have been less than 300,000 for 59 weeks, which is the longest string since 1973.
Outside of the U.S., further upward support was provided by the strike of oil workers in Kuwait, which affected Kuwaiti oil production. Stratas Advisors also forecast that the Brent-WTI differential would trade between $1 and $2 with respect to the June contract. The forecast of the Brent-WTI differential aligned with the actual price movement. The Brent-WTI differential started the week at $1.39 then moved to $1.62 on Wednesday then narrowed to close the week at $1.38.
For the upcoming week Stratas Advisors expects that the price of Brent crude oil will remain relatively flat (but with the bias toward the upside) with the June contract expiring on Friday, April 29. Additionally, the firm is forecasting that the Brent-WTI differential will trade between $1 and $2 with respect to the June contract.
For additional details supporting this forecast click here.
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