Oil prices show a corrective growth after very noticeable sales, observed last week, which resulted in a decrease in basic contracts of ~ 10%.
In addition to the pressure that formed the growing dollar, market sentiment worsened and industry data. In particular, the growing activity of US oil producers again threatens the achievement of a balance in the market in the short term. Weekly statistics on the level of production in the US recorded new historic highs of 10.25 mn bbl / d, while the decline in inventories was suspended.
In addition, the US plans to sell 100 mn bbl of oil from the strategic reserve in the next two years to cover the budget deficit, which, of course, will add supply to the already "thin" market.
Data from Baker Hughes added negative colors at the end of the week, reflecting an increase in the number of oil drilling rigs by 26 units, thus reaching a maximum since April 2015. (791 units). Separately, it is worth mentioning the statement made by the Iranian side about the intention to increase production in the next four years by 0.7 mn bbl / d (up to 4.7 mn bbl / d).
As a result, the market participants had practically no chance to resist the growing negative background, which led to the mentioned correction by 10%. This week, for the market, the following major events can be highlighted: OPEC reports (Mon) and IEA (TU), as well as an inflation statistic in the US, which will determine the further dynamics of the dollar.
The OPEC report is more likely to be slightly more positive than the IEA report. However, in both documents, the main focus and short-term challenges for the market will be concentrated on the factor of American production. In the event that the market can find more positive in the reports and the dollar does not begin to gain strength again, we expect Brent to return to the $ 64-68 mark, otherwise the correction may develop, and the contracts will recede to the area to $ 60-64 / bbl.
Oliver Gilbert, analyst of company
Foto: © Reuters. Oil rose in price