Oil Price Fundamental Daily Forecast – Battle Lines Being Drawn Between Bullish Speculators and Bearish Short-Sellers

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher shortly before the U.S. opening. The markets are rebounding from earlier losses, helped by Saudi statements that OPEC and Russian-led production cuts that were initiated in 2017 will need to be extended into 2019 in order to tighten the market.

The early Friday rally is coming on the heels of a huge reversal top on Thursday that was fueled by worries of a possible trade war between the United States and China.

At 0937 GMT, May WTI crude oil futures are trading $64.71, up $0.41 or +0.65% and June Brent crude oil is at $68.66, up $0.28 or +0.41%.

To recap the big event on Thursday, President Trump signed a presidential memorandum that could impose tariffs on up to $60 billion of imports from China, while the world’s second-largest economy countered with its own plan on Friday to impose tariffs on up to $3 billion of U.S. imports.

Trumps proclamation was followed by a potentially bullish statement by Saudi Arabian Energy Minister Khalid al-Falih, who said that OPEC members will need to continue coordinating with Russia and other non-OPEC oil-producing countries on supply curbs in 2019 to reduce global oil inventories.

The quote from Falih that is driving the price action today is as follows:  “We know for sure that we still have some time to go before we bring inventories down to the level we consider normal and we will identify that by mid-year when we meet in Vienna. And then we will hopefully by year-end identify the mechanism by which we will work in 2019.”

Forecast

The only thing we can count on today is elevated volatility levels. In the meantime, the battle between the bulls and the bears will continue given the news. Bullish traders, led mostly by speculators are scaring the short-sellers out of the market. They are basing their buying on tensions between the Saudis and Iran as well as low inventories that are scraping the bottom of the five-year range and expectations of accelerated demand as the spring driving season approaches.

Bearish traders, on the other hand, are basing their positioning on expectations of increased U.S. production. Today’s U.S. rig count could make the difference as to whether we close higher or lower today.