As we expected, Brent and WTI were both range bound last week. Brent crude averaged $62.44/bbl, up $0.11/bbl. WTI crude averaged $57.05/bbl, up $0.15/bbl. For the week ahead, we expect prices to slowly drift lower with Brent averaging closer to $62/bbl. The next few weeks are likely to be relatively calm with most participants awaiting official news on US-China and OPEC+.
As we have reiterated several times, no news is bad news for prices when it comes to the US-China trade discussions. There have been few updates about a potential first phase deal, or the current pace of talks. Markets will continue to wait-and-see if a trade deal materializes in the weeks ahead. If no news appears, prices will continue to drift lower.
An extension of the current OPEC+ supply agreement is now generally expected by markets. Prices will see little movement if an extension is announced, but will certainly move to the downside if the extension is lower or shorter than expected. Trader positioning and corporate commentary indicates that supply is much less of a concern heading into 2020 on expectations for an extension and the belief that 2018’s subdued prices likely discouraged investment.
Day-to-day activity will likely be tracking headlines, although there is the possibility of larger profit-taking transactions in advance of the shorter trading week in the US next week. Protests in Iran are unlikely to have a physical impact, but the government response is worth watching for an indication of how threatened leadership feels.
Geopolitical Unrest – Neutral
Global Economy – Neutral
Oil Supply – Neutral
Oil Demand – Negative
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