Oil Fundamental Forecast – February 20, 2017

U.S. and international crude oil markets posted an inside move on Friday, indicating trader indecision and impending volatility. The higher close suggests that perhaps investors will be leaning towards the upside on Monday.

April West Texas Intermediate Crude Oil closed at $53.78, up $0.18 or +0.34%. International April Brent Crude Oil finished at $55.81, up $0.06 or +0.11%.

On Friday, a stronger U.S. Dollar may have helped curtail demand. Also another increase in drilling and record stockpiles in the United States may have put a cap on any gains. For the fifth straight week, U.S. energy companies added oil rigs, according to Baker Hughes.

Forecast

Unless there is unexpected news, we’re looking for oil prices to remain rangebound on Monday. The price action may be limited because of the U.S. bank holiday.

Increasing U.S. production is helping to keep a lid on prices. Additionally, both crude oil and gasoline posted record highs in inventory the week-ending February 10, according to the U.S. Energy Information Administration.

At the end of the week, the gasoline crack spread, a key indicator of refining margins, fell more than 11 percent, hitting a one-year low.

On the bullish side of the coin, OPEC continues to claim that its members are reducing production. Current data shows that compliance with the cartel’s plan to reduce output is at about 90%.

In fact, late last week, there was a rumor circulating that OPEC is so pleased with the initial results of the program that it is considering extending it beyond the first deadline in June. Of course, it is going to take considerable negotiation to do so, but nonetheless, the story is out there. Crude oil could pick up a bid if the story gains traction. This would be somewhat unexpected news that could drive prices higher.