In the week since our last edition of What’s Affecting Oil Prices, Brent averaged $63.57/bbl last week with prices maintaining recent support after a successful OPEC meeting.
For the upcoming week, Stratas Advisors expect prices to be range-bound at about $63.50/bbl with few factors for forward momentum present. Stratas Advisors also expects the Brent-West Texas Intermediate (WTI) differential to average $5.75/bbl.
The supporting rationale for the forecast is provided below.
Geopolitical: Positive
Geopolitics as it relates to oil could continue to drive volatility, but is unlikely to have an additional immediate fundamental impact. The few active hotspots that bears watching are more likely to hamper oil supply, further helping prices.
Dollar: Neutral
Crude oil and the dollar traded in line last week, but crude oil remains more influenced by fundamental factors and sentiment. The DXY is being driven by debate about tax reform as the deadline to pass legislation nears.
Trader Sentiment: Positive
Recent CFTC data show that Brent and WTI managed money net longs were near record levels heading into last week’s OPEC meeting. After the meeting ended in a full-year supply extension from OPEC and non-OPEC countries, sentiment is unlikely to sour and will continue to be supportive.
Supply: Positive
Last week the number of operating oil rigs in the U.S. rose by two. U.S. oil rigs now stand at 749, compared with 477 in 2016. After a successful extension of the OPEC/non-OPEC supply agreement, concerns about immediate oversupply will not be as prominent. However, the pace of U.S. supply growth will likely come back into sharp focus for the next six months.
Demand: Positive
Demand remains healthy in the U.S., with strong product exports indicating a robust appetite elsewhere as well. Gasoline and distillate stocks are both below the five-year average on robust domestic demand and strong export flows. Demand is likely to remain strong through the end of 2017 on healthy holiday consumer spending and travel.
Refining: Neutral
Margins were flat to down last week, but remain generally healthy on a seasonal basis with all enclaves currently at or above the five-year average. Combined with healthy global demand, current margins will continue to incentivize crude intake despite recent price increases after the OPEC meeting.
How We Did
Recommended Reading
Hess Pushes Shareholders to Vote in Favor of $53B Chevron Merger
2024-04-01 - Hess Corp.’s board is unanimously recommending its shareholders vote in favor of the proposed $53 billion all-stock merger with Chevron Corp., according to Chevron’s March 28 Securities and Exchange Commission filing.
EIA: E&P Dealmaking Activity Soars to $234 Billion in ‘23
2024-03-19 - Oil and gas E&Ps spent a collective $234 billion on corporate M&A and asset acquisitions in 2023, the most in more than a decade, the U.S. Energy Information Administration reported.
Exxon Signals Potential Counter Offer for Hess’ Guyana Assets
2024-03-07 - Exxon Mobil has filed a contract arbitration claim related to Chevron’s proposed purchase of Hess Corp.’s interests in the Stabroek Block offshore Guyana.
CERAWeek: Exxon Mobil CEO Says Not Trying to Acquire Hess
2024-03-18 - CEO Darren Woods said Exxon Mobil is trying to secure preemption rights over Hess Corp.'s Guyana assets in its dispute with Chevron, not buy the company itself.
Chevron, Exxon in Dispute Over Hess Stake in Guyana Oil Block
2024-02-27 - Chevron’s $53 billion deal to buy Hess’ interests in the Stabroek Block offshore Guyana could be derailed as Exxon, CNOOC say they have first rights of refusal on the block’s interests.