Benchmark crude oil futures surged last week almost 6%, achieving in the meanwhile, the strongest weekly rise since last July and wiping out losses since late January. The basic argument for this surge is that oil market fundamentals are getting tighter, due to the fact that global inventories are already not lying far from the five-year average, and last week the supporting factors were much stronger than the downside ones. The oil markets also continued to be influenced closely by evolution in equity and currency markets.
The prices were boosted mainly by an unexpected drop in US oil inventories driven by lower imports, and higher refinery runs and demand. Actually, the total US demand is 1mn bpd higher than last year. Adding to the record Opec compliance to the cut agreement in February (138%), Saudi energy minister declared that production cuts will continue in 2019 with a new cooperation platform. Rising tension with Iran also contributed to the upside, while FGE is assessing that new US sanctions on Iran might result in a drop of 0.25-0.50mn bpd in its exports by year-end. However, the positive sentiment in the market was still tempered by the rising trend of the US crude oil production. US oil rig count rose by four to reach 804, the highest in the past three years.
Goldman Sachs considers that continued robust demand growth will likely lead Opec to overshoot in draining global inventories, which may help Brent in reaching $82.50/bbl by mid?year, while Morgan Stanley is predicting that Brent would hit $75 a barrel in the third quarter as seasonal demand picks up. (Gulf Times)
