Oil Price Fundamental Weekly Forecast – Libyan Pipeline Shutdown Offsetting Impact of Firmer U.S. DollarPrices are likely to remain firm at the start of the week due to the events in Libya.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures closed sharply higher last week after reversing earlier weakness fueled by a stronger U.S. Dollar.
Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spreads from 0.0 pips with a commission charge of USD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Helping prices to rebound was data from the Energy Information Administration which showed that U.S. crude inventories unexpectedly fell 1.6 million barrels the week-ending February 16. Crude stocks at the Cushing, Oklahoma, futures delivery hub, fell 2.7 million barrels last week. Traders were looking for a 1.8 million build.
Helping to push the markets to the upside at the end of the week was a drop in Libyan production and upbeat comments from Saudi Arabia that an OPEC-led effort to trim excessive stockpiles is working to balance the market.
Crude prices jumped on Friday after the shutdown of the El Feel oilfield in Libya, which produces 70,000 barrels per day of crude.
Prices are likely to remain firm at the start of the week due to the events in Libya. The market seems to be in balance because the effects of the OPEC-led production cuts are being offset by rising U.S. production. This means outside events like the Libyan pipeline shutdown and economic events like the strengthening U.S. Dollar will have a bigger impact on the price action.
Taking it one step further, the Libyan pipeline shutdown is a short-term event which means it will have a bigger influence on the day-to-day price action. The impact of the stronger dollar is likely to have a longer-term effect on crude oil demand.
Traders are going to have to treat the Libyan issue the same way they reacted to the shutdown of the Keystone and the Forties North Sea pipeline shutdowns. Prices are likely to remain firm due to uncertainty. Remember that investors don’t like uncertainty. Once investors find out how long the shutdown is expected to last, the rally is likely to be capped.