Crude Oil Market Weekly Analysis

The price of light crude oil (WTI) and Brent oil ended the week at higher levels. The good reports of China’s imports were the main reason for rising oil prices. In December’s crude oil price rose by 4.19 percent to $ 51.73 and Brent’s January price closed at 2.87 percent at $ 56.95. China’s crude imports reached 9 million barrels per day in September. Average crude oil imports between January and September were 8.5 million barrels per day.

The unrest in Iraq has also had a positive impact on oil prices. According to the recent news, Kurdish authorities have sent thousands of troops to the  Oil-rich Kirkuk to confront the threats of the central government of the weekly reports of the US Energy Information Administration (EIA) also reported that the

US crude oil resources have fallen in the week ending October 6th and the demands for crude oil by refineries has also increased. But here, the level of fuel reserves has increased unexpectedly.

The US crude reserves dropped to 2.7 million barrels, which was better than predicted by analysts. The fuel reserves also experienced a growth of 2.5 million barrels, which was better than the 480,000 units predicted. The level of oil condensate reserves, including Fuel oil and diesel, has fallen by 1.5 million barrels, up from the forecast of 2.2 million barrels. Demands for US refineries increased 229,000 barrels a day. With a 1.1 percent increase in refinery capacity, the overall level of active capacity of refineries in the US reached 89.2 percent.

The worst weekly report on the crude oil market is related to the IEA report, which states that demands for OPEC oil will be about 32.5 million in the next year, which is 150 thousand barrels less than the previous forecast. The weakness of crude oil demands will make OPEC’s crude oil supply not be able to balance the market and, therefore, due to OPEC to reach the world’s crude oil reserves level to the five-year average, will have to lower its production levels further.

At the end of the week, a report was released about the number of US oil active rigs by Baker Hughes. The number of active oil rigs declined for the second consecutive month, leading to a strong uptrend rally of $ 50. In the week ending October 13th, the total number of active oil rigs dropped by five units to 743 units, the lowest level since early June.

The market is expected to be neutral over the mid-term and fluctuate within a limited range. As long as the OPEC and non-member countries do not decide on the agreement to reduce the level of oil production, the market cannot cross the fluctuating range. Indeed, OPEC and non-member countries have to deal with the level of production, since US producers will not help to resolve the surplus of oil supplies. If predicted by the International Energy Agency come true, the oil prices will face to strong resistance, and it is likely that the market supports will be fragile.

Not only the International Energy Agency predicts that demand will be weak, but the US Energy Information Administration also predicts that US crude oil production will reach 9.2 million barrels per day in 2017 and 9.9 million barrels per day in 2018.  While the US oil production in 2016 was 8.9 million barrels. The International Energy Agency also expects US crude oil production to grow by 470,000 barrels per day to 1.1 million barrels in 2018. Unrest in Iraq can also support oil prices, but this bullish move will be limited due to concerns about rising oil production and lower demand.