Oil Monthly Forecast - July 2017

Brent daily chart

Brent daily chart

This would be oil's eighth straight session of gains - the longest streak for West Texas Intermediate, the USA benchmark, since a 10-day rally in late 2009 and early 2010.

The U.S. dollar.DXY fell to its lowest since October in early trading on Friday, giving investors an incentive to buy dollar-denominated commodities such as crude oil. One is U.S. supply side response to low oil prices. The production data showed that the production from Libya was much stronger than expected and this pushed the oil prices through $45 and then for a couple of weeks, the oil inventory data from the USA showed a clear build up in the inventory when a draw was expected and this added to the pressure on the oil prices. In addition, Libya and Nigeria, two OPEC members exempted from the curbs, have increased output although not by enough to alter the overall picture of lower OPEC output in the six-month period. Several banks have cut their outlook for oil prices in the second half of 2017, saying that despite OPEC's guaranteed production cuts the surplus is still substantially higher than it should be.

Crude began the first week of July marginally higher than Friday's close, as a drop in United States oil rig count last week - the first since January - lent support to expectations that the country's tight oil production growth might be starting to stall due to lower prices.

The current situation is that stock of crude oil rose to 118,000 barrels over the past week and simultaneously production dipped by 100,000 barrels a day.

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Another factor, affecting oil prices is concern about the growth of oil production in Libya.

Oil markets remain oversupplied as output from the Organization of the Petroleum Exporting Countries hit a 2017 high. On Monday, the Saudi press agency says the kingdom-led bloc has given Qatar two more days-until Wednesday-to comply to the group's demands. According to the US Department of Energy, Venezuela is the third-largest supplier of imported crude oil and petroleum products to the United States, though USA imports from Venezuela have been on an overall decline in recent years.

Rising U.S. production has undermined some of the impact of the OPEC-led cuts. WTI is down 5.64% over the past year. Meanwhile, data from the Energy Information Administration (EIA) showed crude output fell in April for the first time this year. The next largest proved oil reserves are in Saudi Arabia with 268 billion barrels and Canada with 173 billion barrels.

WTI light sweet crude was up 15 cents at $46.15 a barrel, trying for the eight straight daily advance following a mid-June collapse into bear market territory.

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