Get Set For Sub $45 Crude As Early As Next Week: Analysts

Analysts say the stage has been set for another substantial fall, likely in the sub-$45 region, as early as next week.

Although oil prices climbed 2 percent on Thursday after suffering a 4 percent slump the day before, analysts warn that the stage has been set for another substantial fall, likely in the sub-$45 region, as early as next week.

After rising at Thursday’s session high to $47.47, Brent crude futures settled up $1.11 at $47.37 per barrel; and after hitting $45.80, West Texas Intermediate futures settled up 93 cents at $45.68 per barrel.

Not surprisingly, the reason for the volatility in prices is the on-going concern about the global oil glut, exacerbated by data showing weak demand for U.S. fuel during what should have been a busy summer driving season, coupled with weak demand for Middle East grades in Asia.

The International Energy Agency said this week that U.S. crude stocks fell less than anticipated last week, while gasoline and distillate inventories climbed unexpectedly.

Moreover, data from Genscape reveals a 171,511 barrel build at the Cushing, Oklahoma delivery hub for WTI futures during the week to July 12.

While Wednesday’s poor showing is said to have been excessive, the question now revolves around what comprises a fair price for oil, and Phil Flynn, an analyst at Price Futures Group, says, “I think $44 is a good support, as $40 or below will again deter investments."

Tamas Varga, an analyst with PVM Oil Associates, is of similar inclination, and she told media that Brent could break below its 100-day moving average of $44.84 as early as next week.

These predictions add to the growing cumulative consensus that weak demand will continue for the foreseeable future. 

Even the typically bold Organization of the Petroleum Exporting Countries in its new monthly report admits that although crude demand in 2017 will be greater than its current output, many negative economic factors will slow the pace of that growth.