What's Affecting Oil Prices This Week? (Feb. 6, 2017)
For the upcoming week, Stratas Advisors forecast the price of Brent crude will test $58. The firm also expects the Brent-West Texas Intermediate (WTI) differential will trade between $2.25 and $3 with respect to the April contract.
Prior to the beginning of the week, Stratas forecast the price of Brent crude would trade in the range between $54.50 and $56. The forecast was based, in part, on the expectation that there remained too much uncertainty about the supply outlook with the market waiting for confirmation of the extent of the OPEC production cuts coupled with the market having concerns about the rebound in U.S. production.
Furthermore, Stratas expected the demand side of the equation would continue to exhibit weakness highlighted by the weakness in U.S. gasoline demand.
The actual price movement of Brent crude proved to be more to the upside than the firm's expectations. The price of Brent started the week at $55.52 on Jan. 30 and then jumped about $56 in the middle of the week before closing the week at $56.81 on Feb. 3.
Stratas also forecast that the Brent-WTI differential would trade between $2.25 and $3 with respect to the April contract the week of Jan. 30. In actuality, the Brent-WTI differential traded during the week within the forecasted range.
The Brent-WTI differential started the week at $2.35 on Jan. 30 then widened to $2.89 on Feb. 1 before narrowing in the second half of the week to close the week at $2.34 on Feb. 3. The widening of the Brent-WTI differential on Feb. 1 was the result of the significant increase in U.S. crude inventories, which was reported by the Energy Information Agency to have increased by 6.46 million barrels.
For more on other factors affecting oil prices this week visit StratasAdvisors.com.