Oil Price Fundamental Weekly Forecast - Unrest in Iraq Could Provide Some Support

Brent daily chart

Brent daily chart

Oil prices declined on Thursday, after the International Energy Department reported a bearish outlook of the market.

"I think the market is able to absorb that 2 million bpd of US exports easily", Glencore's head of oil trading Alex Beard told the Reuters Global Commodities Summit.

Oil prices rose on Friday, as turmoil in the Middle East underpinned the market. The amount of stored USA crude fell by 2.8 million barrels last week, the Energy Department said Thursday.

WTI Crude Oil (Light Sweet) price at NYMEХ Stock Exchange is up by 1.12% to $51.45 per barrel.

Total oil product exports C-FUEXP-PRM in September fell 11 per cent to 3.82 million tonnes from a year ago and dropped 17 per cent from August.

Gasoline stocks rose 2.5 million barrels, versus forecasts for 480,000-barrel drop, spurring US gasoline futures to extend losses and gasoline margins RBc1-CLc1 to turn negative after the data.

Meanwhile, OPEC's oil production rose by 88,500 barrels a day in September, a small increase led by Libya and Nigeria, two countries exempt from the group's agreement to curb supplies. According to reports, Kurdish authorities have sent thousands more troops to the oil region of Kirkuk to confront "threats" from Iraq's central government.

However, the IEA said its numbers implied a build of up to 800,000 bpd could take place in the first quarter of next year, meaning OPEC and its partners cannot afford a slip in adherence to their supply-restraint deal.

"This means OPEC must deepen its production cuts to finish its job of bringing oil stocks back to the five-year average", Fritsch said.

Finally, the USA oil rig count fell for a second week in a row, extending a two-month drilling decline, even as crude prices rallied to over $50 per barrel.

USA crude oil inventories fell last week as refining rates rose, while gasoline posted an unexpected hefty build, the Energy Information Administration said on Thursday. I'm not confident prices will breakout to the upside until OPEC and non-OPEC producers decide to extend and deepen the current production cuts. But for US producers hoping for prices to break out of the doldrums, it's not exactly what they want to hear. Prices will continue to be capped and support may even be threatened if the IEA forecasts are proven to be valid.

Year-to-date, crude buying rose 12 per cent from a year ago to 318 million tonnes, or 8.5 million bpd, a record high.