Crude Oil Futures: September 19-23 Weekly Outlook

oil-rig

On Friday, oil futures decline suddenly, with U.S. crude prices reaching more than five week decline as an indication of a continuing recovery in U.S. drilling activity joint with increasing exports from Organization of the Petroleum Exporting Countries (OPEC) added to concerns over a worldwide supply surplus.

On September 19, oil prices increase nearly 2%, after Venezuela said OPEC and non-OPEC producers were close to getting a production agreement and as clashes in Libya elevated concerns that struggles to restart crude exports could be interrupted.

On the NYMEX, delivery of crude oil in October dropped to a daily low of $42.74 a barrel, a level not seen since August 11. It ended at $43.03 by close of trade, drop 88 cents, or 2%, on the day.

During the week, New York traded oil futures declined $2.54, or 6.2%, the 3rd weekly loss over the past four weeks.

Market participants continued to concentrate on U.S. drilling predictions, during signs of a current recovery in drilling activity. Late Friday, oilfield services provider Baker Hughes stated that the number of rigs drilling for oil in the U.S. the previous week increase by 2 to 416, indicating the 11th increase in 12 weeks.

That happened after government data published on Wednesday presented large weekly builds in U.S. petroleum products.

Distillate  inventories, including diesel, surges by 4.619 million barrels the previous week, much higher than expectations for an increase 1.543 million barrels, according to the U.S. Energy Information Administration.

The increased was the biggest weekly build since January and put distillate stocks at six year seasonal peaks.

The report also presented that gasoline inventories increase by 567,000 barrels, disappointing anticipations for a 343,000-barrel drop.

Somewhere else, on the ICE Futures Exchange in London, delivery of Brent oil for November fell 82 cents, or 1.76% on Friday to settle at $45.77 a barrel by the close of trade. The deal fell to $45.48 earlier, the lowest since September 2.

During the  week, London-traded Brent futures dropped $2.04, or 4.67%, during increasing concerns over the probability of returning crude supplies from Libya and Nigeria.

Libya and Nigeria are both members of the Organization of the Petroleum Exporting Countries. Increased output from the two countries could upset the hard work by the oil group to cap production in order to rebalance the market.

Swelling Iranian exports further reinforced worries of a global surplus. The 3rd biggest OPEC producer increased crude exports to more than 2 million barrels per day in August, approaching pre-sanctions levels.

Attention now changes to the upcoming meeting between major oil producers later in September to discuss an production freeze.

OPEC members, headed by Saudi Arabia and other big Middle East crude exporters, will meet non-OPEC producers headed by Russia at informal talks in Algeria between September 26 and 28.

According to market experts, “chances that the meeting would yield any action to reduce the global glut appeared minimal. Instead, most believe that oil producers will continue to monitor the market and possibly postpone freeze talks to the official OPEC meeting in Vienna on November 30.”

An effort to jointly freeze output levels earlier this year was unsuccessful after Saudi Arabia backed out over Iran’s rejection to participate of the initiative, emphasizing the struggle for political competitors to forge consensus.

In the week onward, oil traders will be concentrating on U.S. stockpile data on Tuesday and Wednesday for new supply and demand indications.

Market participants will also continue to observe progresses before the informal meeting of major oil producing countries in the coming week.

On Additional News

On September 20, Tuesday, the American Petroleum Institute, an industry group, is to post its weekly report on U.S. oil supplies.

On September 21, the U.S. Energy Information Administration is to post its weekly report on oil and gasoline stockpiles.

Baker Hughes will release weekly data on the U.S. oil rig count on September 23.

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