Oil Price Fundamental Weekly Forecast – Output of OPEC Meeting to Set Tone for Week

Mixed fundamentals led to a mixed finish in the crude oil market last week with U.S. West Texas Intermediate crude oil closing lower and international-benchmark Brent crude oil closing higher for the week.

September WTI crude oil futures closed at $49.58, down $0.13 or -0.26% and October Brent crude oil futures finished the week at $52.42, up $0.20 or +0.38%.

The week started on a positive note with U.S. crude oil surging into the close of trading to settle above the key psychological level of $50 a barrel. The catalysts were a big drop in U.S. crude stockpiles and Saudi Arabia’s vow to cut oil exports in August. These were the same reasons why crude surged nearly 8.6 percent the previous week.

The rally ended with a thud on Tuesday after WTI crude oil hit $50.43 and Brent reached $52.93, their highest levels since May 25. The sell-off was blamed on reports that OPEC’s output rose last month despite the cartel’s deal to slash production.

Bloomberg News reported that OPEC’s July output rose by 210,000 barrels a day. Market-monitoring firm Petro-Logistics said the producer group’s output was up by 145,000 barrels a day last month and Reuters reported an implied jump of 90,000 barrels a day from OPEC members.

Prices consolidated on Wednesday and Thursday after the U.S. Energy Information Administration’s weekly inventories report showed that surging U.S. fuel demand offset data that showed crude inventories did not fall as much as expected the week-ending July 28.

According to the EIA, crude inventories fell by 1.5 million barrels, about half the decline analysts had expected. The report also showed estimated weekly gasoline demand at a record high 9.842 million barrels.

Finally, oil prices rebounded on Friday after a strong U.S. jobs report bolstered hopes for growing energy demand. However, the rally was labored because of concerns over rising OPEC exports and strong output from the United States.

In other news, Baker Hughes reported its weekly count of oil rigs operating in the United States fell for the second week in three. The count ticked down by 1 oil rig to 765.

Forecast

The tone of the market could be set early this week when officials from an OPEC and non-OPEC technical committee meet in Abu Dhabi on August 7-8 to discuss ways to boost compliance with their supply reduction agreement.

Top producers Saudi Arabia and Russia have signaled they are ready to get tough with oil producers who are still pumping more than they promised, but it remains to be seen how they will back their rhetoric.

If the Saudi’s and Russians impose some tough rules on their counterparts then we could see another surge in crude oil prices. If they fail to gain control of the growing output from Libya and Nigeria, for example, then prices could weaken.