The Week In Hindsight, 06 June 2014
Brent crude closed lower this week despite a fresh wave of stimulus from the ECB. The decline in prices was largely attributable to the scheduled reopening of one of Libya’s largest export terminals as a deal was reached with port guards over pay, while the lifting of an oil embargo upon Iran was also a factor.
The terminal coming back online bodes well for overall Libyan production as it indicates that the fragmented government has the potential, and willpower, to make progress in its attempts to resolve the nation’s long running crisis. This is while Iranian exports coming back to market are likely to add to existing expectations that OPEC output will increase over the months ahead, which could continue to drive a further correction in prices over the near term.
WTI crude closed the week fractionally higher following another week of rapid draw downs at reserve facilities in Cushing, Oklahoma and some better than expected economic data from the US.
Overall, the longer term outlook for oil benchmarks continues to see elevated prices over the months and quarters ahead. Despite this, the short term could see a correction in both Brent and WTI driven by rising supply as out of action economies such as Libya and Iran come back to market. Another factor of influence is pressure upon OPEC to increase output in order to meet anticipated demand over the remainder of the year.