Front month oil prices experienced a volatile week, though the general trend has thus far been an upwards one. The Brent contract has appreciated and is currently trading higher since the end of last week, around the seemingly magnetic $111/bbl mark, said Barclays in a report. The WTI benchmark has increased in a more pronounced manner, to trade above $87/bbl. Market sentiment closely followed the Gaza conflict and the subsequent ceasefire that followed.
Oil prices moved higher at the beginning of the conflict, and while there was a downward move when the ceasefire brokered by Egypt was agreed on, prices recovered to levels very close to those when the fighting was actively taking place.
In the North Sea, Statoil’s Troll C platform was brought back online after corrosion was found at auxiliary components last Thursday. This has reintroduced at least 120 thousand b/d into the market; a significant portion of Norway’s total daily production.
Although not as pronounced as they were a few months back, cargo delays continue to weigh on the region’s exports.
The demand picture, however, looks more positive, especially given the trade data released by China earlier in the week. October crude imports into the country surged 18% y/y, by 680 thousand b/d to 5.6 mb/d, as the country maintains a healthy growth recovery path which started in September.
It is also possible that this increase is also due in part to a building of the country’s strategic petroleum reserves. Implied oil demand was higher by 7% from the same time last year, clocking in at 9.75 mb/d.
Although the supply and demand fundamentals are fairly balanced at the moment, the upside risks continue to outweigh those to the downside.
Source: Barclay's Research