Oil Price Fundamental Daily Forecast – Bulls May Be Building Case for Rally
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures fell sharply on Monday, losing a little over 1 percent. Profit-taking was being blamed for the sell-off as investors took advantage of an unexpected two-day surge in prices amid talk the market was starting to rebalance.
October WTI crude oil settled at $47.53, down $1.13 or -2.32% and internationally-favored November Brent crude oil closed at $51.28, down $1.13 or -2.16%.
In other news, Iraq informed its customers that it plans to switch its price benchmark for Basra crude in Asia to DME Oman futures from January, dropping the average of Platts’ Oman-Dubai quotes, in a major shift in the way it prices its oil.
Forecast
Looking at Friday’s and Monday’s price action, one can conclude that crude oil is in a range bound market. U.S. crude inventories have been declining for weeks. If this downtrend continues then a bullish case can be made for oil, especially if OPEC and other non-OPEC producers continue to restrict production.
According to the U.S. Energy Information Administration (EIA), U.S. commercial crude inventories have fallen by almost 13 percent from their March peaks, to 466.5 million barrels.
Also supporting the case for a rally are signs that U.S. production may be losing steam. Although U.S. crude production has broken through 9.5 million barrels per day (bpd), its highest since July 2015, this growth may soon slow if U.S. energy firms start reducing the number of rigs drilling for new oil. Supporting this conclusion is last week’s Baker Hughes report that showed a decline of three rigs.
Helping to keep a lid on prices are concerns over demand especially from China. Traders will also be watching for signs of weakening U.S. demand now that the summer driving season is coming to an end.
The major support is $46.52 to $45.57. On the upside, major resistance is $48.57 to $49.02.
This article was originally posted on FX Empire
