Crude oil futures - weekly outlook: March 16 - 20

Investing.com - Crude oil futures fell sharply on Friday to hit the lowest level in six weeks, following the release of a mostly bearish report from the International Energy Agency on global oil supply and demand.

In its closely-watched monthly oil market report released Friday, the IEA warned that an oil-price recovery remained fragile amid a production rebound in the U.S.

The agency added that any appearance of stability in the oil market is tenuous.

On the New York Mercantile Exchange, crude oil for delivery in April plunged $2.21, or 4.7%, on Friday to end the week at $44.84 a barrel. Nymex oil touched an intraday low of $44.75, a level not seen since January 29.

For the week, New York-traded oil futures sank $4.76, or 9.61%, the fourth consecutive weekly loss and the largest since early December.

Industry research group Baker Hughes (NYSE:BHI) said Friday that the number of rigs drilling for oil in the U.S. fell by 56 last week to 866, the 14th-straight week of declines.

The number of working U.S. oil rigs is 46% lower than an all-time high of 1,609 hit in October.

Market players have been paying close attention to the shrinking rig count in recent months for signs it will eventually reduce the glut of crude flowing into the market.

However, total U.S. crude oil inventories stood at 448.9 million barrels as of last week, the most in at least 80 years, indicating that cheap prices have yet to affect output.

Elsewhere, on the ICE Futures Exchange in London, Brent for April delivery tumbled $2.41, or 4.22%, on Friday to settle the week at $54.67 a barrel by close of trade.

London-traded Brent hit $54.43 earlier, the lowest since February 5. The April Brent contract dropped $4.95, or 8.47%, on the week, the second straight weekly loss.

Oil prices have stabilized in the $50-to-$60-region in recent weeks, following a seven-month rout which saw prices drop as much as 60% after OPEC resisted calls to cut output, while the U.S. pumped at the fastest pace in more than three decades, creating a glut in global supplies.

The spread between the Brent and the WTI crude contracts stood at $9.83 a barrel by close of trade on Friday, compared to $10.12 in the preceding week.

Meanwhile, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped 1.2% on Friday to end at 100.32, the most since April 2003.

Dollar-denominated oil futures contracts tend to fall when the dollar rises, as this makes oil more expensive for buyers in other currencies.

The euro fell below the $1.05-level against the greenback for the first time in 12 years, pressured lower by the diverging monetary policy stance between the Federal Reserve and the European Central Bank.

Demand for the dollar continued to be underpinned after stronger-than-forecast nonfarm payrolls report for February released earlier in the month solidified expectations for higher interest rates.

The Fed is expected to begin raising interest rates around the middle of this year and investors were looking ahead to next week’s policy statement to see if it would drop its reference to being "patient" before raising rates.

In the week ahead, market players will focus on the conclusion of the Federal Reserve's two-day monetary policy meeting on Wednesday, which could provide indications on how soon it might raise interest rates.

If the Fed decides to remove a reference to "remaining patient," in its statement, it typically indicates that interest rates could be raised at either of its next two meetings. After next week's meeting, the FOMC will meet in June and September.

Oil traders will also continue to monitor developments surrounding talks between Iran and world powers over Tehran's nuclear program as well as fighting in Libya.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Friday as there is no relevant data on this day.

Monday, March 16

The U.S. is to produce reports on industrial production and manufacturing activity in the New York region, as well as private sector data on the housing market.

OPEC will release its monthly report on global oil supply and demand.

Tuesday, March 17

In the euro zone, the ZEW Institute is to report on German economic sentiment. The euro area is also to release revised data on consumer inflation.

The U.S. is to report on building permits and housing starts, while the American Petroleum Institute, an industry group, is to publish its weekly report on oil supplies.

Wednesday, March 18

The U.S. is to release its weekly government report on oil inventories.

Later in the day, the Fed is to announce its federal funds rate and publish its rate statement, which outlines economic projection and the factors affecting the monetary policy decision.

Fed Chair Janet Yellen is to hold what will be a closely watched a post-policy meeting press conference.

Thursday, March 19

The U.S. is to release reports on jobless claims, the current account and manufacturing activity in the Philadelphia region.