Oil Price Fundamental Daily Forecast – Boosted by Increased Demand for Risk, Dampened Concerns Over Recession

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Friday. The markets are being underpinned by the OPEC-led production cuts and the U.S. sanctions against Iran and Venezuela, which have helped tighten the global supply.

However, today’s rally is likely being fueled by increased demand for risky assets and firmer U.S. Treasury yields, which have dampened concerns over a U.S. recession later in the year. The catalyst behind the price action is the optimism created by the resumption of the trade negotiations between the United States and China.

At 07:58 GMT, May WTI crude oil futures are trading $59.58, up $0.28 or +0.47% and June Brent crude oil is at $67.29, up $0.19 or +0.28%.

Crude oil is set to post its biggest first quarter gain in 10-years. Additionally, WTI futures are in a position to rise for a fourth straight week and are set for a first quarter gain of 31 percent. Brent futures are set to post a gain of 27 percent for the first quarter.

CNBC says, “For both futures contracts, the first quarter 2019 is the best performing quarter since the second quarter of 2009 when both gained about 40 percent.”

The strong gains this quarter may have prompted President Trump to call for OPEC to boost production to lower prices on Thursday.

“Very important that OPEC increase the flow of Oil. World Markets are fragile, price of Oil getting too high. Thank you!” Trump wrote in a post on Twitter.

Trump made a similar request last month that was largely ignored by OPEC’s defacto leader Saudi Arabia. Looking ahead, the Saudi’s favor cuts for the full year, but the Russians want them to end in September. OPEC and its allies are scheduled to meet in June to discuss whether to continue with its production cuts.

Trump also seems to have conveniently forgotten that the U.S. sanctions against Iran and Venezuela have contributed to the reduction in supply and the first quarter price rise.

The recent price action indicates that demand concerns are helping to put a lid on prices. Furthermore, crude oil has been moving nearly lock-step with the stock market, leading Saxo Bank’s Ole Hansen to say, “The biggest short-term risk to the oil market is likely to be driven by renewed stock market weakness.”

Daily Forecast

Increased demand for riskier assets and firmer Treasury yields should continue to be supportive for crude oil today. However, if stocks turn south today then crude oil is likely to move down with them. Furthermore, traders will also be watching for progress in the U.S.-China trade negotiations. Good news will be supportive, but negative developments could pressure prices.