Brent and WTI both fell sharply last week. Brent fell $5.02/bbl to average $58.18/bbl, breaking the psychological $60/bbl barrier. WTI fell $3.33/bbl to average $53.29/bbl. Concerns about economic growth are the dominant influence on prices right now, but supply threats support some bullish views.
Prices followed an interesting path last week, gaining strength Thursday and Friday despite the release of a less optimistic International Energy Agency report. Reports indicating that Russian oil production in August would exceed agreed levels were countered by Saudi Arabia announcing that it would limit September oil exports to help stabilize prices. Although prices have gained heading into the week, we expect only minimal improvement for the week overall, with Brent likely to average closer to $59/bbl but with decent upside potential.
For the week ahead, the axiom “no news is good news” rings especially true. If no further negative economic developments occur, spot prices could stabilize and increase through the week. Rig counts continue to fall in the United States, but reports of crude or product builds will be negative for prices. When it comes to supply, the Strait of Hormuz remains a high-risk area although a large-scale outage is unlikely.
Geopolitical Unrest: Positive
Global Economy: Negative
Oil Supply: Neutral
Oil Demand: Negative
How We Did
First horizontal completion in Crossroad Fields plus BP's results from Carthage Field-Haynesville Shale Well.
U.S. shale players have turned to technology to improve their ability to accurately see beneath the surface.
Companies added one oil rig in the week to Oct. 18, bringing the total count to 713, Baker Hughes said in its weekly report.