At the beginning of the week Stratas Advisors expected that the price of Brent crude would remain relatively flat (but with a bias to the upside). The expectation was based on the market consolidating around recent gains—and because of the downward pressure expected from another build in crude inventories in the U.S. The actual price movement, however, proved to be more bullish than our expectations for the second straight week.
The price of Brent crude started the week at $45.11 and moved upward throughout the week to close at $48.13. Like the previous week, the increase in crude inventories was offset by another drawdown in inventories of distillate fuel oil in the U.S. Another factor providing upward support was the weakness of the U.S. dollar.
Stratas also expected that the Brent-WTI differential would trade between $1 and $2 with respect to the June contract. In actuality, the Brent-WTI differential widened slightly more than expected with the differential starting the week at $1.38 and then increasing throughout the week to close at $2.21. The widening stemmed from the jump in the price of Brent crude that occurred in the latter part of the week, moving from $45.74 at the close of Wednesday to $48.13 at the close of Friday as the June contract moved toward its expiration date.
For this week, Stratas believes the price of Brent crude oil will trade between $45and $47. Additionally, it is forecasting that the Brent-WTI differential will trade between 20 cents and $1with respect to the July contract.
For further reasoning on this projection, visit StratasAdvisors.com.
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