In the week since our last edition of What’s Affecting Oil Prices, Brent pulled back from the brink of $70 to average $68.61/bbl.
For the upcoming week, Stratas Advisors expect Brent prices to average $68.50/bbl as trading activity picks up and the market remains quiet at the start of the week. This week Stratas analysts expect the West Texas Intermediate-Brent differential to average $5.50/bbl.
Geopolitical: Neutral
Geopolitics will be a neutral factor in the week ahead. The restart of production from Libya will offset comments from Saudi Arabia’s energy minister Khalid al-Falih indicated on Jan. 21 that OPEC members are likely to cooperate in some form past 2018. This is not likely to come as a surprise.
Dollar: Neutral
The dollar will be a neutral factor next week as crude oil remains more influenced by fundamental factors and sentiment.
Trader Sentiment: Positive
Trader sentiment will be a positive factor in the week ahead with net positioning near record highs. RSI hovers near overbought territory as it has since end-December, raising the possibility of a price correction, likely triggered by a negative weekly U.S. inventory report.
Supply: Neutral
New supply from Libya is offset by a fall of five oil-directed rigs in the U.S. Though this fall is likely weather-related, Stratas Advisors see supply as neutral this week.
Demand: neutral
Demand was a mixed bag last week as wild weather continues to move through much of the country. While there could be a surprise this week from the EIA, we consider it a neutral factor.
Refining: Neutral
Refining margins continue to fall but rebounded this week. While we are concerned about the longer term impacts of refinery margins compression, this is offset by some short-term increase.