On a weekly average basis, Brent and WTI both increased last week, although Brent saw slightly more support. Brent increased $3.89/bbl to average $65.17/bbl last week. WTI increased $3.13/bbl last week to average $59.31/bbl. For the week ahead, Stratas Advisors expect Brent to average $64.50/bbl as a geopolitical price premium remains in place.
Flooding in East Texas impeded some refinery activity and slowed shipments through the Houston Ship Channel. Direct damage from the flooding appears minimal and operations are swiftly returning to normal but minor crude or product builds could be reported in future weekly data.
In the week ahead Saudi Arabia’s government is expected to press the United Nations to form a coalition to take action against Iran. However, potential allies remain reticent to commit to an armed intervention. Although there is likely to be ongoing inflammatory statements from both sides, the risk of a large-scale confrontation in the next week is low. However, Brent will maintain a geopolitical price premium of at least $3/bbl through the week.
Geopolitical Unrest – Positive
Global Economy - Negative
Oil Supply – Positive
Oil Demand – Neutral
How We Did
The Interior Department report said the current federal oil and gas leasing program “falls short of serving the public interest” and called for new rules to boost royalty rates, bonding rates and other fees for producers.
The BLM will auction 37 parcels on 6,851 acres in New Mexico, Texas, Oklahoma and Kansas and includes parcels in the Permian Basin, the world's biggest oil field.
Auction in waning days of administration sets up a clash with opponents in the state.