Oil Price Fundamental Daily Forecast – Increased Appetite for Risk Could Trigger Upside Breakout
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Friday and at the top-end of this week’s range on increased appetite for risk. After consolidating for most of the week due to uncertainty over U.S.-China relations, the price action suggests investors have turned more optimistic that a trade deal will eventually get done.
At 11:07 GMT, June WTI crude oil is trading $62.16, up $0.46 or +0.71% and July Brent crude oil is at $70.93, up $0.54 or +.077%.
In addition to today’s firmer trade, the markets are also trading higher for the week. This suggests that investors may be moving on from trade issues and returning to the major underlying story – tightening global supply.
Despite today’s early strength, traders should note that volatility is expected to remain heightened as long as investors continue to react to headlines.
New U.S. – China Developments
Earlier today, the United States increased tariffs to 25% for $200 billion worth of Chinese goods. While U.S.-China negotiators are expected to continue their meetings, traders are still a little nervous while they await retaliation from China.
Just a short while ago, President Trump drove stock prices lower after he tweeted there’s absolutely no need to rush” on a trade agreement with China. This could have an impact on crude oil prices if it leads to sharply lower equity prices once the cash market opens at 12:30 GMT.
Back to the Basics
Despite the heightened volatility in the equity markets this week, other than Monday’s volatile two-sided trade, the price action has been relatively calm with the markets trading rangebound most of the time. This could be a reflection of investor uncertainty, however, at the same time, it almost always means impending volatility.
The markets continue to be underpinned by the OPEC-led supply cuts and the U.S. sanctions against Iran and Venezuela. This week’s friendly U.S. Energy Information Administration’s (EIA) weekly storage report also provided support.
Additional support is being provided by expectations that oil demand will rise in 2019. The EIA said it expects global appetite for oil to rise by 1.4 million barrels per day this year.
Daily Forecast
Traders seem to have absorbed the issue over whether OPEC will make up from any shortfall from the expanded sanctions against Iran. Furthermore, the problem is not expected to resurface for at least three months. In the meantime, it probably too early to worry about the outcome of the OPEC meeting in late June, which will decide the fate of the cartel’s strategy to trim the excess global supply.
With nothing major on the table this week, traders are being forced to react to the developments surrounding U.S.-China trade relations. This issue could cause a choppy, two-sided trade today, while prices remain rangebound. If risk is on and stocks rally sharply higher then look for a breakout to the upside.
This article was originally posted on FX Empire
