In the week since our last edition of What’s Affecting Oil Prices, Brent averaged $63.57/bbl last week with prices maintaining recent support after a successful OPEC meeting.

For the upcoming week, Stratas Advisors expect prices to be range-bound at about $63.50/bbl with few factors for forward momentum present. Stratas Advisors also expects the Brent-West Texas Intermediate (WTI) differential to average $5.75/bbl.

The supporting rationale for the forecast is provided below.

Geopolitical: Positive

Geopolitics as it relates to oil could continue to drive volatility, but is unlikely to have an additional immediate fundamental impact. The few active hotspots that bears watching are more likely to hamper oil supply, further helping prices.

Dollar: Neutral

Crude oil and the dollar traded in line last week, but crude oil remains more influenced by fundamental factors and sentiment. The DXY is being driven by debate about tax reform as the deadline to pass legislation nears.

Trader Sentiment: Positive

Recent CFTC data show that Brent and WTI managed money net longs were near record levels heading into last week’s OPEC meeting. After the meeting ended in a full-year supply extension from OPEC and non-OPEC countries, sentiment is unlikely to sour and will continue to be supportive.

Supply: Positive

Last week the number of operating oil rigs in the U.S. rose by two. U.S. oil rigs now stand at 749, compared with 477 in 2016. After a successful extension of the OPEC/non-OPEC supply agreement, concerns about immediate oversupply will not be as prominent. However, the pace of U.S. supply growth will likely come back into sharp focus for the next six months.

Demand: Positive

Demand remains healthy in the U.S., with strong product exports indicating a robust appetite elsewhere as well. Gasoline and distillate stocks are both below the five-year average on robust domestic demand and strong export flows. Demand is likely to remain strong through the end of 2017 on healthy holiday consumer spending and travel.

Refining: Neutral

Margins were flat to down last week, but remain generally healthy on a seasonal basis with all enclaves currently at or above the five-year average. Combined with healthy global demand, current margins will continue to incentivize crude intake despite recent price increases after the OPEC meeting.

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