Last week crude oil prices demonstrated a weak recovery after the previous decline. The price of WTI futures rose 0.7% to $45.4/bbl. On Monday, July, 18, the price of WTI was trying to break the support level of $45/bbl, however, this attempt failed. Throughout the week, the price of WTI was fluctuating in a narrow range of $44.6-46.5, and we expect that such a trend is likely to continue into the current week.
The price of Brent futures rose 0.1% in the same period to $46.64/bbl. On July, 13, and July, 15, the price was testing the level of $48/bbl, but failed to remain on this level and went down to a range of $46-47/bbl. Currently, the level of $48/bbl remains a relatively strong resistance level.
Crude oil Brent future price, July, 4 – 19, 2016
The petroleum market data announced last week was ambiguous. Commercial oil stocks in the US decreased only by 2.55m bbl, while the market expected the decrease to be more than by 2.95m bbl. In accordance with the Baker Hughes report, the number of active drilling rigs rose by only 6 units to 357 rigs, and that could be a signal of the future decline in shale oil production in the US. This signal is likely to be a short-term bullish one for the petroleum market.
The International Monetary Fund forecasts that the global economy could pay the price for “Brexit”: a 0.1% reduction of the global GDP in 2016 and 2017. Therefore, it could be a bearish signal for the future demand for crude oil and petroleum products, and the recovery of crude oil prices is likely to be slow. However, the demand on the petroleum market could go up thanks to the increase of demand from China and in other Asian markets.
We expect the price of Brent next week to be in a range of $46.5-48.5 bbl, WTI could remain in a range of $45.2-47/bbl.
Source:: Oil market review, 13-19 July