Last week crude oil prices fell sharply. The price of WTI futures dropped 6.5% to $42.63/bbl. On July, 21, the price of WTI successfully broke the important support level of $45/bbl, and the price of crude went down to $42/bbl. The range of $41-42/bbl is likely to be a new support level for the price, however, it is difficult to say whether this support level is likely to be a strong one or not.
WTI futures price, July, 12 - 26, 2016
On July, 26, the price of WTI reached its local bottom of $42/bbl, however, currently the price remains above this level, and the local downtrend is slowing.
The price of Brent futures lost 5.4% in the same period and declined to $44.54/bbl. The price fell over the 4 days, and we expect that this week is likely to be the time for a correction in the downtrend. We consider the level of $41-42/bbl as a relatively strong support level for Brent crude oil.
Brent futures price, July, 12 - 26, 2016
The petroleum market data announced is still ambiguous. Commercial oil stocks in the US dropped by 2.34m bbl, while the market expected the decrease to be only by 2.1m bbl. However, in accordance with the Baker Hughes report, the number of active drilling rigs demonstrated a rapid growth and increased by 105 units to 462 rigs. Shale oil production in the US has begun to recover earlier than expected. We believe that this data had a negative impact on crude oil prices.
The World Bank has upgraded its forecast for average crude oil prices in 2016 from $41/bbl to $43/bbl. The analysts at the World Bank see the increase in demand for crude oil as a key driver of the future growth, as well as a slight decrease of crude oil export from Nigeria and Canada.
We expect the prices of Brent and WTI next week to be in a range of $41-44/bbl.