Oil Price Fundamental Daily Forecast – Hedge Funds Still Betting Rally Will Continue
U.S. West Texas Intermediate and international-benchmark Brent crude oil settled higher on Wednesday after recovering from earlier losses that were fueled by a bearish private industry report.
September WTI crude oil settled at $49.59, up $0.43 or +0.87%. October Brent crude oil closed at $52.36, up $0.58 or +1.12%.
The catalyst behind the recovery was a report from the U.S. government showing a surge in U.S. fuel demand. The news was strong enough to offset a report that showed crude inventories did not fall as much as expected last week.
According to the U.S. Energy Information Administration, crude inventories in the United States fell by 1.5 million barrels during the week-ending July 28, traders were looking for a 3.8 million barrel draw down.
However, the report also estimated that weekly gasoline demand hit a record high 9.842 million barrels.
The EIA data also showed evidence of strong refinery runs that continued to boost demand for crude. Refinery crude runs rose by 123,000 barrels per day last week. Additionally, the report confirmed that distillate demand was running a solid 14.5 percent over the same period a year ago.
Forecast
The price action late Wednesday and early Thursday suggest bullish traders are attempting to re-assert control over the market after the one-day set-back. This indicates the market is still in the strong hands of the hedge funds, who weren’t spooked by the divergence between the American Petroleum Institute’s inventories report late Tuesday and early Wednesday’s inventories report from the U.S. Energy Information Administration.
I expect to continue to see two-sided data and two-sided responses over the near-term as some headlines will mention bearish factors like OPEC’s inability to reign in production as well as increasing U.S. production and other will mention bullish factors like Wednesday’s increase in gasoline demand.
I think the actual order flow in the market rather than the headlines will continue to dominate the trade. This means that prices will remain supported and in a positon to move higher as long as the hedge funds maintain their large positions.
The hedge funds like volatility and they tend to follow the 200-day moving averages for both WTI and Brent crude oil. These futures contracts are currently straddling this technical level. A sustained move over this moving average will likely attract additional buying from the hedge funds. This action could launch another leg up in the rally.
This article was originally posted on FX Empire
