Oil Monthly Fundamental Forecast – March 2016

Outlook and Recommendation

Crude Oil is set to end the month of 33.8 with a monthly gain of 0.65% while Brent Oil closed at 36.64 up over 5% for the month. Oil traders are preparing for another downward turn in prices by March 2016, market data suggests, as what is expected to be an unusually warm winter dents demand just as Iran’s resurgent crude exports hit global markets after sanctions are ended.

Crude futures have already lost around 60 percent of their value since mid-2014 as supply exceeds demand by roughly 0.7 million to 2.5 million barrels per day to create a glut that analysts say will last well into 2016.

Goldman Sachs said on Thursday that there was a substantial risk of a “sharp leg lower” in oil prices.

“Mild winter weather over the coming months could see weak heating demand in the U.S. and Europe,” it said. This “would likely be the trigger for adjustments through the physical market, pushing oil prices down to cash costs, which we estimate are likely around $20 per barrel,” the bank added.

Moody’s lowered its price assumption in 2016 for Brent crude oil, the international benchmark, to $43 from $53 per barrel and for West Texas Intermediate (WTI) crude, the North American benchmark, to $40 from $48 per barrel.

After a stuttering start, the oil price settled into a strong rally at the end of the month with international benchmark Brent crude touching an eight-week high above $37 a barrel on Friday.

The price fell back to a little above $35 a barrel by the end of the final session of the week in New York, meaning it was essentially flat for the day. Despite an earlier rise in the overnight Asian session, Brent continued falling and dipped below that threshold again this morning in London.

Some positive data on supplies in the US over the weekend prompted the modest upward move in Asia. The Energy Information Administration revealed output from the country fell to 9.1 million barrels a day last week, notes the Wall Street Journal. Other data published last week also noted a decline in the number of active rigs in the country.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

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March 1, 2016