As we expected, crude oil prices declined last week for the fourth straight week. The price of Brent crude ended the week at $78.66 after closing the previous week at $81.95. The price of WTI ended the week at $76.11 after closing the previous week at $80.69. Also, as we have been forecasting, the Brent-WTI differential widened to $2.55 from the previous week of $1.26.

For the upcoming week, we are expecting further downward pressure on oil prices.

  • With consideration of the increased supply from OPEC+ and from non-OPEC producers, including the US, we are forecasting that global liquid supply will increase by 1.39 million b/d in 4Q (in comparison with 3Q). In comparison, oil demand is forecasted to increase by 0.620 million b/d in 4Q.
  • Another factor affecting oil prices is the US dollar, which continues to strengthen, with the US Dollar Index closing last week at 96.07, in comparison to the previous week of 95.12. The US dollar has rebounded significantly since reaching of low of 89.64 on May 25 and is now at the highest level of all year – and the highest level since July of 2020. We have been forecasting that the US Dollar Index would continue to increase through the year and would reach 96.00 – and now that this level has been reached, we expect the US dollar to continue to strengthen. The shifting monetary policy of the Federal Reserve to being less accommodating, along with the expectations for future tightening, are providing upward support for the US Dollar.
  • As has been the case for longer than we care to remember, we continue to monitor the COVID-19 situation. COVID-19 cases, from a global perspective, continue to increase at an accelerating pace. Over the last 14 days, cases increased by 15%, and deaths are now flat (after declining by 5% during the previous period). While cases are still trending downward in other regions – cases are increasing in Europe, as well as North America.
  • Last week, traders of WTI decreased their net long positions by reducing their long positions by 9.72%, while maintaining their short positions. For the sixth straight week, traders of Brent decreased their net long positions with traders reducing their long positions and increasing their short positions. After previously weekly decreases of 9.3%, 7.9%, 6.4%, 3.7%, 3.9%, the decrease was 7.7%.