At the beginning of last week Stratas Advisors expected Brent crude would trade between $43 and $46. The outlook was driven, in part, by the view that traders were moving away from adding long positions, and, instead, the number of long positions was starting to decline.
Further downward pressure was expected from growing levels of product inventories, which are already elevated, and from declining refining margins. Downward pressure was expected to offset the impact of declining production in North America stemming from further declines in shale-related production and from Canada as a result of the wildfire that broke out in the oil sands region.
Actual price movement proved to be more to the upside than expectations. The price of Brent crude started the week at $45.37 then dropped to $43.63 on Monday and then moved to $48.08 on Thursday before closing the week at $47.83. The upward movement in Brent crude pricing was supported by drawdown in U.S. crude inventories of 3.41 million barrels, as reported by the Energy Information Agency (EIA).
Stratas Advisors also expected the Brent-WTI differential would trade between minus20 cents and 50 cents with respect to the July contract. In actuality, the Brent-WTI differential started the week at 5 cents then flipped to WTI being priced higher with the differential going to a minus 40 cents on Monday, and then flipping back to Brent being priced higher to close the week at 93 cents.
For the upcoming week Stratas Advisors expects the price of Brent crude oil will test the $50 level. Additionally, the firm is forecasting the Brent-WTI differential will trade between 65 cents and $1.40 with respect to the July contract.
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