In the weeks since our last edition of What’s Affecting Oil Prices, crude prices finally cracked, falling sharply last week. Brent prices fell $2.25/bbl to average $76.51/bbl and WTI fell $4.51/bbl to average $67.13/bbl.
As previously discussed, future and spot prices have seen a disconnect over the past few weeks, with several spot cargos remaining unsold. Recent geopolitical disruptions and fundamental news about global oil stocks were leading bullish sentiment to support high prices.
However, positioning indicated that this bull run was coming to an end. After OPEC and Russia announced a willingness to stop restricting production in an effort to lower global prices, prices swiftly fell.
For the upcoming week, barring an official announcement that OPEC will be dissolving its deal early—which would lower prices further—we expect prices to be range-bound to slightly down this week. We expect Brent will average $75/bbl with WTI lower at $66/bbl.
Geopolitics will be a neutral factor with no explicitly new developments apparent that would exert new influence on oil 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.
Trader Sentiment: Neutral
Trader sentiment will be a neutral factor in the week ahead, possibly even weighing on prices as the recent bull run comes to a close.
Supply will likely be a negative factor in the week ahead with Saudi Arabia and Russia openly considering changes to the current oil supply agreement that could bring more oil to markets.
Demand will be a negative factor in the week ahead as rising prices cause greater concern from local governments about demand destruction. Protests and government calls for action have been seen in Brazil, the U.S. and India.
Refining will be a neutral factor in the week ahead.
How We Did
The weekly average Brent price fell $2.11/bbl last week to average $68.21/bbl. WTI fell even more sharply, down $3.80/bbl to average $57.01/bbl.
For the week ahead we expect Brent to be generally range-bound and average closer to $71/bbl on news out of OPEC, concerns about U.S. crude builds, and ongoing trade tensions with China.
Brent to average $61/bbl as prices pause and markets reevaluate economic expectations.