As we expected, crude prices continued going up again last week. The price of Brent crude ended the week at $82.58 after closing the previous week at $79.24. The price of WTI ended the week at $79.59 after closing the previous week at $75.25.
Last week, we highlighted that the oil market would be affected by some major news items. One such news item was the latest U.S. jobs report, which was released on Oct. 8. This report was a surprise with the U.S. adding only 194,000 and well below the consensus expectations of around 500,000. One of the contributors to the weak jobs report was the loss of 123,000 public-sector jobs, with local government education jobs declining by 144,000—stemming from the lingering impact of COVID-19. Another news item of most importance was the outcome from the OPEC+ meeting. The decision was arrived at quickly and just shortly after we had posted our weekly note the morning of Oct. 4, which included our expectations that OPEC+ would not announce any changes to its current plans of increasing supply by 400,000 bbl/d per month but would wait for further evidence that global economy and oil demand are back on the path of more reliable demand growth. Our view remains that OPEC+ is comfortable with prices being around the $80 level but does not want prices to spike—nor does OPEC+ want to lose market share. As such, we think OPEC+ will adjust supply, when required, to achieve these goals.
The U.S. Dollar Index remained essentially unchanged (94.1 versus 94.07) last week. The U.S. Dollar Index has rebounded from a low of 92.03 at the beginning of September and is back on the upward trend that started in May of this year, when the U.S. Dollar Index had fallen to 89.24. The increasing strength of the U.S. dollar will put some downward pressure on oil prices. However, other factors, including supply/demand fundamentals remain supportive of oil prices—even with some concerns about demand—especially with Asia—because of the remaining restrictions pertaining to COVID-19 and energy shortages, which are negatively impacting economic activity in China and India.