Yahoo Finance Oil Price Fundamental Weekly Forecast – IEA Warning, Labor Issues in Norway, Iraq Could Be Supportive
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures settled lower last week. The highlight of the week was the more than 5 percent drop in prices on Wednesday. Volatility is likely to remain at heightened levels as the market continues to work out highly sensitive supply issues.
September WTI crude oil finished the week at $69.95, down $1.62 or -2.26 percent and September Brent settled at $75.33, down $1.78 or -2.31 percent.
To recap the week, after trading higher early in the week, prices plunged on Wednesday after OPEC member Libya reopened its ports in the east and U.S. Secretary of State Mike Pompeo said Washington would consider granting waivers to some of Iran’s crude buyers. Prices were also pressured by fears that a U.S. – China trade dispute could hit global economic growth. Furthermore, some traders are worried that China could eventually impose a tariff on imported U.S. crude oil.
Underpinning the markets were declining oil supplies from Venezuela and labor issues in Norway and Iraq that could curtail supply. Additionally, there are also fears that the U.S. would eventually push forward with its original plan to cut imports from Iran to zero starting in November.
Another unexpected drop in U.S. inventories may have also added to the support late in the week. On Wednesday, the U.S. Energy Information Administration said that U.S. crude stockpiles fell by 12.6 million barrels during the week-ending July 6. This was the biggest price slide in nearly two years.
Finally, probably providing the strongest support after the steep drop in prices were the comments from the International Energy Agency (IEA). The IEA warned on Thursday that the world was short of spare supply capacity and hence any new disruption could further elevate prices.
In other news, General Electric Co’s Baker Hughes said the U.S. oil rig count remained steady at 863 in the week to July 13.
Forecast
The markets appear to have found support late last week after Wednesday’s steep sell-off. The warning by the IEA seems to have slowed down the selling and perhaps brought in a few new buyers.
The IEA said in its monthly report, “Rising production from Middle East Gulf countries and Russia, welcome though it is, comes at the expense of the world’s spare capacity cushion, which might be stretched to the limit.”
“This vulnerability currently underpins oil prices and seems likely to continue doing so,” the agency added.
The IEA statement is likely to continue to underpin the markets while the news of labor disputes in Norway and Iraq is likely to attract new buyers.
Any surprise announcements about increased supply could limit gains or even drive prices through last week’s lows. For example, an end to the strikes in Norway and Iraq could be the catalysts for such a move.
This article was originally posted on FX Empire
