Crude Oil Weekly Fundamental Analysis, August 10 – August 14, 2015 Forecast

Analysis and Recommendations:

September Crude Oil futures finished lower for the eighth consecutive week. The market also posted its lowest low and lowest close for the year. The weak finish indicates there is enough downside momentum to continue the move next week. 

The fundamentals are clearly bearish and not likely to change until U.S. production begins to decline or OPEC decides to alter its aggressive output. U.S. production is being watched on a week-by-week bias while OPEC is not likely to even consider a production cut until it meets in December. 

The market is nearing the psychological $40.00 level. A test of this level may encourage some profit-taking which could produce a short-covering rally. However, this rally is not likely to last unless accompanied by a decline in U.S. production. 

Last week, the U.S. Energy Administration’s inventories report for the week-ended July 31 showed that U.S. commercial crude oil stocks fell 4.4 million barrels to 455.3 million barrels. The draw was driven by strong refinery activity and a drop in crude oil imports. 

The headline number looked bullish because traders were looking for a 1.6 million barrel decline. However, sellers continued to pressure prices because of increased U.S. production. Crude oil production was estimated to have risen 52,000 barrels per day to 9.465 million barrels per day. Continental U.S. production rose 54,000 barrels/day to 9.007 million barrels per day, ending a four-week streak in which output was falling or flat. 

Also pressuring prices was an increase in gasoline stocks. According to the EIA, gasoline stocks increased 811,000 barrels last week to 216.7 million barrels. Analysts were looking for a 700,000 barrel decline. 

Prices were also influenced by expectations of lower demand from China and the strong possibility of increased production by Iran sooner-than-expected. On Friday, Baker Hughes, Inc. announced that the rig count in the U.S. rose 6 to 670 to its highest level in over 3 months. The rig count has now risen 5 out of the last six week. This is another reason why U.S. production should continue to rise. 

The global supply glut is expected to continue to exert pressure on the market, but oversold technical factors may come into play periodically especially if the $40.00 level is tested. 

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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