HardAssetsInvestor

Written by Sumit Roy  |

July 11, 2012

Brent To Rally Toward $110 As OPEC Production Falls

Details

Oil prices paused over the past week, but the new uptrend remains intact.

The Department of Energy reported this morning that in the week ending July 6, U.S. crude oil inventories decreased by 4.7 million barrels, gasoline inventories increased by 2.8 million barrels, distillate inventories increased by 3.1 million barrels and total petroleum inventories increased by 3 million barrels.

Crude oil prices continued to consolidate over the past week. Brent has hovered just above and below the $100 mark, while WTI has fluctuated around $85.

Our outlook for prices is unchanged. We expect prices to continue to trend higher, as supplies tighten amid plunging Iranian exports and voluntary cutbacks by Saudi Arabia. Brent is likely to test the next resistance level near $110 in the coming weeks and months.

BRENT

WTI

The latest inventory figures from the EIA were neutral to slightly bullish, as U.S. crude inventories declined more than expected, while gasoline and distillate stocks rose more than expected.

In its monthly Oil Market Report, OPEC said that it expects global demand to grow by 0.9 mmbbl/d this year, unchanged from its previous forecast. Demand is anticipated to grow 0.8 mmbbl/d in 2013.

Non-OPEC supply may grow by 0.7 mmbbl/d this year, followed by 0.9 mmbbl/d in 2013.

The cartel said that its oil production totaled 31.36 mmbbl/d in June, down 106 Kbbl/d from the prior month.

The International Energy Agency’s forecasts for supply and demand are set for release on Thursday.