The oil prices had a slight downtrend movement in the week ending Aug. 10, which recorded a loss in the fifth of the last six weeks.The price of the West Texas Intermediate (WTI) for September delivery and Brent for October delivery decreased by 1.49 percent and 0.65 percent, respectively, in the week and at the end of the week, WTI settled at 67.63 U.S. dollars a barrel and Brent settled at 72.81 dollars a barrel.
Oil prices started the week with slight gains due to the report indicating that Saudi Arabia's crude output in July was quite below its output in June and the U.S. President Donald Trump's vows to reimpose the sanctions on Iran.
On Monday, WTI for September delivery increased by 0.52 percent and settled at 69.01 dollars a barrel on the New York Mercantile Exchange. Brent crude for October delivery also started the week with slight gains on Monday and it increased by 0.63 percent to 73.75 dollars per barrel on ICE Futures Europe.
On Wednesday, U.S. Energy Information Administration (EIA) reported a draw of 1.4 million barrels in commercial crude oil inventories. The draw was below the expectations of the analysts. Both exports and imports were higher for the week ending Aug. 3 compared with the previous weekly report levels. Exports increased by 3.78 million barrels while imports increased by 1.27 million barrels for the week.
U.S. net imports of crude oil decreased by 358,000 barrels per day during the week. Anas Alhajji, an energy economist based in Dallas, Texas, told Xinhua that "unlike the past, U.S. weekly crude oil inventories have become extremely sensitive to U.S. net imports, making short term oil prices more volatile."
EIA also reported on Wednesday that U.S. oil production declined to 10.8 million barrels per day in July from its record high level of 11 million barrels per day in the previous month. EIA has reported two weekly declines in crude oil output.
On Wednesday, the bearish inventory report was also followed with the news over the trade tensions between the United States and China. Earlier that day, it was reported that Chinese government added the U.S. crude oil to the list of the newly imposed tariffs. The oil market was rattled by the news. However, it was reported later that day that U.S. crude oil was not in in the list.
Due to the larger than expected build in U.S. oil products and increasing trade tensions between the United States and China, the WTI prices for September delivery and Brent prices for October delivery contracts took large losses and declined by 3.11 percent and 3.02 percent, respectively, on Wednesday.
On Friday, Baker Hughes reported that the number of active drilling oil rigs in the United States increased by 13 to 1057. Analysts were surprised to see an increase of five rigs in the Permian Basin despite the big price differential between Midland and WTI due to pipeline bottlenecks.
Analysts saw those pipeline bottlenecks as a big threat against production growth of the Permian Basin. Also, it was interesting that oil producers added three offshore rigs in the week.
On Friday, U.S. Dollar Index reached its highest levels within the last 52 weeks. That was another negative factor that pressured the oil prices during the recent week. U.S. Dollar Index is a measure of the value of the dollar relative to a basket of foreign currencies. Oil is mostly traded in U.S. dollars all over the world and a stronger dollar pressures the oil demand.
Despite the increasement of U.S. rig count and very high U.S. Dollar Index, oil prices moved upwards on Friday. The WTI prices for September delivery and Brent prices for October delivery increased by 1.33 percent and 1.13 percent, respectively, on Friday.
The upward movement was triggered by the revision of International Energy Agency (IEA) on 2019 demand. IEA increased its oil demand growth estimate to 1.5 million barrels per day from 1.4 million barrels per day.
The price differential between WTI contracts of September and Brent contracts of October stood at 5.18 at the end of Friday. The widened differential mainly due to the reports indicating that Saudi' s crude oil output has dropped to normal levels in July from its record-high levels in June.
Analysts pointed out the widening gap between WTI and Brent can support U.S. oil exports in the future.
The higher differentials between the two major benchmarks are, the more arbitrage opportunities for traders to pursue. As a result, more U.S. crude oil would be shipped to Asian market.
The oil market is concerned with the ongoing trade tensions between the United States and China. The Chinese oil demand growth has been a main driver of the increasing oil demand.
The oil market will be watching the development about the international trade disputes very closely next week. Also, the extent of U.S. sanctions on Iranian crude oil exports and the currency crisis of some emerging countries will be in the radar of the oil market.
Matthew Smith, the director of commodity research at ClipperData in Houston, U.S. state of Texas, told Xinhua that "Persian Gulf exports continuing to exhibit strength, as OPEC members such as Saudi Arabia, UAE and Kuwait ramp back up their exports as the OPEC production cut is unwound, while Iran is already starting to see buyer fatigue for its crude, with lower export volumes in recent weeks."
Latest comments