Brent fell $2.16/bbl last week to average $64.43/bbl, in line with our forecast. WTI fell $2.60/bbl to average $58.24/bbl. For the week ahead we expect Brent to continue drifting lower, likely averaging $63.50/bbl.
Little immediate bullish support for crude is present, but the recent signing of a US-China trade deal helps provide a floor for prices. This week could see volatility in some Mediterranean-focused grades as Libyan supplies are interrupted once again. However, overall markets shrugged off the force majeure, as there is plenty of supply to fill the gap. Overall weakness in crude will likely continue through the first quarter per seasonal norms. The first quarter tends to see crude and product stock builds but any outsized movements in the US, Europe or Asia would still be viewed negatively. In China, Lunar New Year’s celebrations may entail less travel than usual as the country deals with outbreaks of a new coronavirus.
OPEC+ has been surprisingly silent about its plans for March. Some recent statements have indicated that there is room for an upside surprise in demand, but it is unclear how much that possibility is factoring into future actions. For now outages in Libya and Venezuela, along with generally decent compliance, are helping the organization meet its production goals. With Norway’s Johan Sverdrup field increasing deliveries, non-OPEC supply growth will be top of mind again and markets could be disappointed if stronger signals do not come from OPEC.
Geopolitical Unrest – Neutral
Global Economy – Neutral
Oil Supply – Negative
Oil Demand – Negative[shoojuview id="thpqqlagjpuwrbocltoa