The Week In Hindsight, 18 July 2014

Crude benchmarks rose moderately this week, with much of the upside movement occurring over the course of Thursday and Friday. While the main driver behind price action has been the attack on a commercial airliner in Ukrainian skies, faster draw downs upon inventories in the US and continued crises elsewhere in world were also a factor behind WTI & Brent’s respective paths of ascent.

The trajectory of both benchmarks had been set resolutely toward the downside over the previous fortnight as long futures positions, which built to record levels during June, have been culled in response to overbought conditions.

A rise in Libyan production has also been credited with helping to drive the market lower over recent weeks, however; the stop-start nature of the conflict within the North African nation means that this new supply is far from secure going forward.

In addition to this, Iraq remains an issue for those hoping for a sustained period of price weakness. While the market appears to have shrugged off potential risks emanating from the conflict here, a resolution is far from near. Consequently, Brent is likely to remain biased toward the upside the entire time that such threats to supply remain a factor.

In relation to WTI, the North American benchmark continues to benefit from increased demand in the states. With no material change to the US economic outlook, and a firm data driven rebound still on the cards; downward pressure upon prices is likely to lack sufficient momentum for a sustained push below $100 per barrel to be feasible.