Before the beginning of last week, Stratas Advisors forecast that the price of Brent crude would be under pressure with support at $50. The forecast was based on the expectation that downward pressure would continue to come from the negative perception of supply resulting from the rebounding of shale-related production in the U.S. coupled with uncertainty about the duration of the OPEC-related production cuts. Furthermore, the firm expected the downward pressure to be at least partially offset by the relatively strong demand with signs that U.S. demand is picking up.

The forecast aligned well with the actual price movement that occurred last week in that the oil price did initially declined, but did not break below the $50 floor. The price of Brent crude then rebounded to reach $52.96 on Thursday before falling back slightly on Friday to close the week at $52.83.

The rebound in the price was supported by statements from the Saudi Arabia Energy Minister that implied openness to extending production cuts pass June. Additional support was provided by the favorable weekly report from the Energy Information Agency (EIA), which indicated a smaller than expected increase in crude inventories coupled with a significant reduction in inventories of gasoline and distillate fuel oil.

Stratas Advisors also forecast that the Brent-WTI differential would fall back into the range between $2 and $2.50 with respect to the June contract. The forecast aligned with the actual movement of the Brent-WTI differential. At the beginning of the week it was $2.83. It widened to $3.02 on Monday before narrowing in the second half of the week after the favorable inventory report from the EIA to close at $2.23.

For the upcoming week, Stratas Advisors is forecasting that the price of Brent crude will move upward, testing $54.50. The firm also expects the Brent-WTI differential will trade in the range of $2 and $2.50 with respect to the June contract

This report is taken from Stratas Advisors’ Short-Term Price Outlook service, which covers a period of eight quarters and provides monthly forecasts for crude oil, natural gas, NGL, refined products, base petrochemicals and biofuels.