Oil Market Outlook
Oil prices recorded a second consecutive week of strong gains, helped by healthy US employment data and a further decline in active oil rigs. Prices were also supported by speculation about an accord between Opec and non-Opec powers to cap production and possibly take other measures to stabilise prices.
However, gains were held in check by the realisation that the global oil glut has hardly shrunk at all over the past several months, while US inventories remain at a record high above 500 million barrels.
West Texas Intermediate last week rose by $3.14 per barrel, closing at $35.92. Brent rose $3.62 to $38.72 and Dubai crude averaged $32. Thaioil forecasts that WTI this week will move within the range of $32 and $37 per barrel, while Brent will trade between $34 and $39. Among the factors expected to influence trade:
Venezuelan Oil Minister Eulogio Del Pino says at least 15 countries are now expected to attend a meeting to discuss an output freeze and possible further actions. The meeting could be held in Russia sometime between March 20 and April 1, but Vienna and Doha are other possible venues. Russia, Saudi Arabia, Qatar and Venezuela agreed last month to proceed with an output freeze if other countries followed suit. Ecuador, Algeria, Nigeria and Oman have since joined the movement.
US inventory gains show no sign of slowing, with an increase of 10.4 million barrels, three times more than forecast, bringing the total to 518 million in the week to Feb 26, the Energy Information Administration reported. The figure reflects declining refinery utilisation during maintenance turnarounds and unattractively low refining margins.
Global oil prices appear to have bottomed out and are expected to rise as investment cuts help to reduce a supply glut, says the International Energy Agency (IEA). It sees the market rebalancing in 2017 as US output declines under pressure from low prices. The IEA expects prices to reach $80 by 2020, with US production reaching a record high of 14.2 million bpd by 2021.
The European Central Bank on Thursday is expected to cut its already-negative interest rate by another 10 basis points to -0.4% to compel banks to lend. Euro zone inflation is still negligible at 0.2%, well below the 2% target. The ECB has signalled a willingness to expand existing stimulus efforts, based on 60 billion euros in monthly purchases of government and low-risk private sector bonds.
The US Federal Open Market Committee will meet on March 15-16. No change is expected in its benchmark rate between 0.25% and 0.50%, given concerns over the weak global economy and aggressive sell-offs in financial markets, which could harm the US economy.
Economic indicators to watch this week include Chinese exports, consumer and producer prices, retail sales and industrial production and euro zone Q4 GDP.