Before the beginning of last week we forecasted that the price of Brent crude would be under pressure with support at $45. The forecast was based on our expectation that the environment for product demand and refining would be negative. Additionally, we expected oil traders to act in a manner consistent with being skeptical of a deal to freeze production in spite of statements to the contrary by Russia, Saudi Arabia and Iraq.

Our forecast aligned closely with last week’s price movement. The price of Brent crude started the week at $48.01 then began weakening in the middle of the week and continued to weaken to close the week at $45.77.

We also forecasted that the Brent-WTI differential would trade between $1 and $2 with respect to the November contract. In actuality, the Brent-WTI differential started the week at $1.55 and stayed within the expected range until the end of the week when the differential widened to close the week at $2.15.

The widening of the Brent-WTI differential was driven, in part, by the EIA inventory report. While the report indicated that crude inventories declined by 559,000 barrels, the report also showed that product inventories increased. Inventories of gasoline increased by 567,000 barrels, and inventories of distillate fuel oil increased by 4.62 million barrels.

For the upcoming week we are expecting that the price of Brent crude oil will continue to be under pressure with support at $45. We are also expecting that the Brent-WTI differential will trade between $1.50 and $2.50 with respect to the November contract.

Find out more about our supporting rationale for this forecast.