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Crude Oil Monthly Forecast – April 2019

By:
Colin First
Published: Mar 31, 2019, 23:03 UTC

The price of US Crude oil in the global market has seen steady upward price action so far this year. While there may have been range bound price actions

WTI and Brent Crude Oil

The price of US Crude oil in the global market has seen steady upward price action so far this year. While there may have been range bound price actions and slight corrective rallies then and there, the overall price trend for every single month this year has been to the upside. This is clearly evident from a look at the weekly chart which shows solid progress of Crude oil’s price action in the global spot market. Further, the factors which supported Crude oil bulls on their positive price rally this month was higher than the last two months. However, crude oil price continued to see disrupting influence from US weekly stockpile data. The spot US Crude oil for the month of March saw over 7% increase in value when comparing the monthly open and close price.

The pair continued to scale new monthly highs across the month as Crude oil bulls seems to have found a reliable form of strength from fundamental perspective. The month started of on positive note supported by optimism surrounding Sino-U.S. trade talks and headlines which hit the market stating crude oil output and exports from Venezuela was down by 60% owing to impact of US sanctions imposed on same. Further, news that OPEC is planning to keep its production and supply cut enforcement till June 2019 & Russia has finally began to take steps to ensure their output meets complies with OPEC+ summit agreed levels by end of March added positive support to crude oil bulls. However an increase in weekly US crude oil stockpile capped gains.

Supply Disruptions From Middle East Underpins Crude Oil Bulls

Since the start of the year, OPEC’s enforcement of production and supply cut agreement has steadily helped improve the supply to demand ratio in the global market and this has served as a long term supporting factor which underpins crude oil bulls. The first half of March also found support from reports which suggested that Saudi Arabia was planning to to reduce the output for April by less than 7 million bpd keeping output well below the target of 10 million bpd and that the US saw the scenario where there was zero import of crude oil from Venezuela for the first time ever in history. Meanwhile, due to sudden power outage Venezuelan Crude oil production and supply activity came to an abrupt halt. The greatly changed the global demand and supply dynamics influencing a fresh wave of sharp upside price action.

The latter half of the month saw crude oil bulls trade range bound near monthly highs supported by OPEC’s supply reduction enforcement. But the price soon hit new 2019 highs and scaled $60 handle in both spot and futures market as the supply disruption for Venezuela over sudden blackout lasted longer than usual. While profit booking activity resulted in price declining from 2019 highs for a short while, shift in supply dynamics influenced by US sanctions on Iran & Venezuela’s crude oil exports and OPEC supply reduction enforcement helped the price recover above $60 handle shortly. A sudden and expected draw in US weekly crude oil inventory data in both API & EIA stockpiles also added support to crude oil bulls. But declining bond yields in global market which resulted in increased risk averse trading and concerns of economic slowdown impacted crude oil price action.

Fundamental Support Leans Towards Bulls But Gain’s Likely To Be Capped

A slowdown in global economic activity would mean reduced demand for crude oil which would once again change supply to demand ratio. But this time the change would favor crude oil bears. And US crude oil stockpile once again rose during last week of March as per weekly inventory data. This resulted in price of crude oil moving back towards $58 handle. But a rebound in global bond market resulted in investors concerns of global economic slowdown and risk averse sentiment easing off. This helped Crude oil price reclaim $60 handle and close for the month on a positive note. Moving forward, the price action is likely to remain positive in the global market but gains are likely to be limited. As  geo-political issues remain unresolved till date and headlines shows signs that neither Sino-U.S. trade war nor Brexit is anywhere near to seeing positive outcome, some level of risk averse investor sentiment and concerns of economic slowdown will linger in the market providing crude oil bears with fundamental support. Even if news report suggests that Russia may have met with OPEC’s supply reduction target and Saudi Arabia decreases its output, these have long since been expected by investors and are likely to have been priced into ongoing rally. While the confirmation of said events will result in crude oil price seeing sharp gains, bulls will see strong resistance at $62 handle and price action will remain range bound with positive bias across the month unless there is an update which is totally unexpected or US weekly crude oil inventories sees consecutive updates with draw in stockpile data.

Please feel free to lelt us know what you think in the comments below.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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