Since OPEC announced the extension of production cuts, the market has continued to react bearishly with respect to the oil price. The price of Brent crude started the week at $52.15 and began declining, settling below $50 on Friday. The price of Brent crude closed the week at $49.95.
Obviously, the market is not impressed with the production cuts, and continues to focus on production increases in the U.S. With the decline in the price of Brent crude, the Brent-WTI differential has narrowed.
The Brent-WTI differential started the week at $2.35, then drifted downward before stabilizing on Friday to close at $2.08.
The narrowing of the Brent-WTI differential was also supported by the significant drawdown in U.S. crude inventories. The Energy Information Agency (EIA) reported in the previous week that crude inventories in the US declined by 6.43 million barrels.
For the upcoming week Stratas Advisors forecasts that the price of Brent crude will be under pressure and will test $49. The firm also expects that the Brent-WTI differential will trade in the range of $2.30 and $1.90 with respect to the August contract.
In this video, Stratas Advisors’ executive vice president John Paisie explains the geopolitical, currency, trade, operational and supply factors contributing this week’s oil prices.