Crude Oil Price Prediction for June 30, 2017

WTI crude rallied to better than two-week highs of $45.45, with gains coming on the back of a pressured dollar, and news from the EIA which indicated U.S. oil production fell by 100k barrels per day in the latest reporting week, likely related to a tropical storm in the Gulf of Mexico last week. Goldman Sachs meanwhile, cut its Q3 WTI average price forecast to $47.50 per barrels from $55.00 previously, due to the quick upturn in production from Libya and Nigeria, along with robust U.S. shale production.

Technicals

Crude oil prices whipsawed moving higher early, but reversed course in the afternoon following a report that Goldman Sachs is slashing its 3-month price forecast.  Support is seen near the 10-day moving average at 43.76. Resistance is seen near the June 12 high at 46.71.

Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal buy signal. This occurs as the spread (the 12-day exponential moving average minus the 26-day exponential moving average) crosses above the 9-day exponential moving average of the spread. The index moved from negative to positive territory confirming the buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices for crude oil.

Goldman Sachs is Slashing its 3-month Price Forecast

Goldman Sachs sold its clients that it was reducing its three-month price forecast for WTI to $47.50 a barrel from $55, seeing output gains in Libya and Nigeria as jeopardizing OPEC’s efforts to reduce global inventories.

Just a week ago, another team of Goldman analysts, the bank’s European energy team, thinks otherwise, saying that the selloff in energy stocks is but an opportunity for buyers and that current low prices are likely unsustainable in the long run. Goldman’s last week note came while the oil prices dropped to a ten-month low. In this week’s report, the investment bank thinks that output gains in production-cut-exempt Libya and Nigeria could derail the inventory drop expected in the third quarter this year.

Earlier this week, reports suggested that while OPEC may be mulling over deeper oil production cuts, they won’t be rushing to make that decision, even though a panel monitoring the cuts will be meeting next month. But today, UAE Energy Minister said there was no such mulling.

Jobs Data is Still Strong

The 2k U.S. initial claims rise to 244k in the final week of June extended a 4k rise to 242k in the BLS survey week to leave a climb as we enter the annual vehicle retooling period, which we think leaves downside claims risk into early-July as discussed in our June 26 commentary. Claims have undershot the 2016 average of 263k in every week of 2017 despite the recent rise, though claims lie above the 44-year low of 227k in the President’s Day week. Claims are averaging 242k in June, versus similar prior averages of 241k in May, 243k in April, 251k in March, and 241k in February. The 242k BLS survey week reading exceeded May’s 233k figure, but sat below prior survey-week readings of 243k in April, 261k in March, and 247k in February. Our 185k June nonfarm payroll estimate faces upside risk from tight claims and still-firm consumer, producer, and small business confidence despite modest Q2 drop-backs for some soft-data measures. We’ve seen a solid 240k average monthly ADP rise thus far in 2017 with a 253k surge in May, though vehicle sales and assemblies have proven slow to recover in Q2 with GDP after a weak Q1 performance.

German CPI Was Higher than Expected

German state CPI numbers higher than expected. After the release of preliminary June CPI readings from 5 states it seems the German headline rate will come in higher than anticipated, as annual rates remained steady or nudged higher and point to a 0.1% points increase in the national CPI rate rather than the deceleration that initially was expected. Yesterday’s Italian number actually came in lower than anticipated, and Spanish HICP dropped to just 1.6% year over year from 2.0% year over year, so the overall Eurozone number still seems set to decline in June.