U.S. West Texas Intermediate and international-benchmark Brent crude oil futures were underpinned most of the week before making a quick about face and settling lower for the week. There was a tug-of-war between bullish U.S. production and bearish OPEC fundamentals throughout the week. This led to a sideways-to-higher trade until Thursday when surprise data from OPEC proved to be too much for the longs to handle, leading to a bearish technical chart pattern and a lower close for the week.
For the week, October WTI crude oil settled at $48.97, up $0.22 or +0.45% and November Brent crude oil closed at $51.94, up $0.16 or +0.31%.
On the bullish side, official data from the U.S. Energy Information Administration (EIA) showed crude inventories fell sharply by 6.5 million barrels in the week-ending August 4, as refiners ramped up run rates to the highest in 12 years due to strong demand.
The news wasn’t good enough to sustain a rally, however, and the U.S. WTI futures market ended up losing 1.5% for the week, its second straight weekly decline, as doubts remain that the world will consume enough crude to end a global supply glut.
The International Energy Administration (IEA) also said OPEC’s compliance with its production cuts in July had fallen to 75 percent, the lowest since the cuts began in January. It cited weak compliance by Algeria, Iraq and the United Arab Emirates.
“There would be more confidence that re-balancing is here to stay if some producers party to the output agreements were not, just as they are gaining the upper hand, showing signs of weakening their resolve,” the IEA said in its monthly report.
In other news, energy services company Baker Hughes reported drillers last week added three rigs in the U.S., bringing the total oil drilling rig count to 768.
The crude oil market is likely to continue to remain rangebound this week as the clash between U.S. production and OPEC production is likely to continue.
The wildcard this week could be Russia. Last week, Russian oil producer Gazprom Neft said he is considering resuming production in mature fields after the OPEC-led production cut agreement.
However, Saudi Arabian Energy Minister Khalid al-Falih also said the kingdom did not rule out additional oil production cut.
This article was originally posted on FX Empire
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