Oil Price Fundamental Weekly Forecast – Traders Worried About Bearish Chinese Demand, Rising U.S. Production
U.S. West Texas Intermediate and internationally-favored Brent crude oil futures closed mixed last week. WTI futures finished lower, reflecting concerns about high U.S. production. Brent closed higher indicating that OPEC’s plan to trim production may be working.
October WTI Crude Oil closed at $48.66, down $0.31 or 0.63% and November Brent crude oil finished the week at $52.41, up $0.47 or +0.90%.
U.S. crude oil inventories fell for a seventh consecutive week, falling 8.95 million barrels the week-ending August 11 to 466.5 million barrels to their lowest since January 2016.
Gasoline inventories did not decline as expected and the data also showed that U.S. crude output rose to 9.5 million barrels per day from 9.4 million a week earlier.
Prices were down most of the week probably due to volatility in the U.S. Dollar. Additionally, the price action was driven by turmoil in Washington and geopolitical events in Spain as well a drop in demand for risky assets and concerns over the strength of the U.S. economy.
In other news, oil services firm Baker Hughes said the U.S. rig count fell by five to 763.
Forecast
Oil prices rose on Friday as the stock market recovered from earlier losses and the U.S. Dollar weakened, however, the market still closed mixed for the week. Bullish traders are hoping the upside momentum created by Friday’s rally continues into next week. This is only likely to occur if the financial markets are stable.
Volatility in the equity markets and the U.S. Dollar is not going to be good for crude oil because it creates uncertainty and plays with the hedge funds. They have to watch their money more closely because of the possibility of margin calls, making them less-likely to speculate aggressively.
Essentially, the price action is being defined by bearish Chinese demand and rising U.S. crude production. This means we’re likely to remain rangebound until Chinese demand increases or U.S. production falls.
The fundamentals may be turning bearish over the next two week because of the end of the U.S. driving season. This may limit gains so I’m leaning towards a sideways-to-lower market.
The key area on the charts this week is $48.57 to $49.02. A sustained move over $49.02 will indicate the presence of buyers. A sustained move under $48.57 will signal the presence of sellers.
This article was originally posted on FX Empire
