Crude oil weekly recap, September 15 – September 19

WTI and Brent futures were little changed this week, as investors struggled to find direction amid speculation of a cut in OPEC output and ample global supplies. A pricier dollar also weighed on contracts, though the upbeat economic data also spurred positive sentiment for US demand.

WTI crude for delivery in October on the New York Mercantile Exchange fell by 0.71% on Friday to settle the week ~0.2% higher at $92.41 a barrel, with the contract reaching a 16-month low of $90.63. West Texas Intermediate lost 1.1% last week.

Meanwhile on the ICE, Brent October futures added 0.71% on Friday to close at $98.39 a barrel, registering a 0.6% weekly gain. November Brent’s premium to its US counterpart widened to $6.74. The European contract lost 3.7% last week.

“We are at the bottom now and we expect prices to remain stable around this level the coming year,” Jens Naervig Pedersen, an economist at Danske Bank A/S in Copenhagen, said for Bloomberg. “Prices have gained some support from the comments from OPEC earlier this week hinting that it may lower its production target for next year.”

Libya, OPEC’s smallest exporter, said its crude output declined amid fighting between rival militants, which left a key oilfield inoperable.

The news came as Saudi Arabia, OPEC’s top producer and exporter with daily shipments of ~7m barrels, confirmed a calm stance in the backdrop of lower-than-desired crude prices.

“Daily, weekly and even monthly [price] gyrations have little meaning and constitute a source of noise around a solid trend,” Prince Abdulaziz Bin Salman Bin Abdulaziz, Saudi Arabia’s deputy oil minister, said for the Saudi Press Agency. “Oil demand is expected to continue on its upward trend.”

There was a bit of speculation that Saudi Arabia will cut output to keep prices in line with a $100 per barrel price, set as the benchmark for OPEC. Speculation was further fueled after the country said its production in August, before prices slumped the most, was 0.4m b/d lower. OPEC also lowered the projection of marketable oil by the cartel to 29.5m per day last week, down from the 30.0m/d set in June.

OPEC’s secretary general lent further support to oil bulls, saying the cartel will probably trim production plans to come in line with market demand.

US demand

The US Energy Information Administration (EIA) reported its weekly oil readings on Wednesday, revealing a significant increase in crude imports led to only the third positive net build in 16 weeks. Crude stocks had added 3.7 million barrels in the week through September 12th, with a 7% weekly increase of imports, while gasoline inventories were down 1.6m and distillates up 0.3m.

On a broader scale, the US economy logged mixed data this week. Jobless claims were at a six-year low, while CPI readings disappointed and fell off the Fed target figures, just as the Federal Open Market Committee (FOMC) was deciding on monetary policy.

The monetary-policy body of the Fed decided to, as expected, cut monthly assets purchases by another $10bn and keep the benchmark interest rate at 0.25%. The Fed’s projection for next year was changed, however, with still a “considerable time” between the QE program closing and rates rising. The end-year rate target, however, was raised to 1.375% from the previous of 1.125%, offering dollar bulls significant support.

The US Dollar Index, which measures the strength of the greenback, reached a 4-year peak this week, weighing on all dollar-denominated commodities, such as oil.

Next week

Next week will offer plenty of data for traders to gauge demand and growth outlooks in top economies.

The US will report on GDP, durable goods orders, and will post a bunch of housing data. Meanwhile, the Eurozone will also see services and manufacturing PMI figures, as well as a couple of economic sentiment gauges.