Brent fell $1.19/bbl to average $70.54 last week while WTI fell $1.12/bbl to average $61.84/bbl. For the week ahead we expect Brent and WTI to be range-bound with Brent averaging $70/bbl.
Stock markets largely shook off President Trump increasing tariffs on China after China agreed to continue trade negotiations. However, with no substantive progress made by the end of the day Friday increased tariffs have taken effect. Oil markets remain cautious but were pressured by concerns about overall economic health if the trade wars drags on.
Hedge funds took divergent positions on Brent and WTI last week, in an indication that supply was of greater concern than future demand. In the US, funds remain concerned about the pace of U.S. shale growth, with recent weekly data indicating a fresh high. Internationally however, a medley of issues continue to threaten volumes. The weeks ahead are likely to see similar positioning trends as tensions mount around Iran and Venezuela. At the same time, refiners are returning from maintenance in the US. If crude runs increase and crude stocks continue to build, markets will quickly turn bearish.
Global Economy: Neutral
Oil Supply: Neutral
More demand could be around the corner with offshore rig tenders as oil and gas companies step up drilling plans and final investment decisions.
U.S. energy firms this week cut the most oil rigs in about four months, with the rig count falling to the lowest since January 2018, as producers cut spending on new drilling and completions.
A Powder River Basin discovery by Chesapeake, LLOG files Gulf of Mexico plan and a triple-lateral horizontal completion in South Texas top this week’s drilling activity highlights from around the world.