Oil Price Fundamental Daily Forecast – Brent Could Outperform WTI if Supply Continues to Tighten

U.S. West Texas Intermediate and international Brent crude oil futures are trading mixed on Friday after prices for the latter went on a wild ride the previous session. On Thursday, there was a slight divergence in the two futures contracts with Brent hitting $70 per barrel for the first time in nearly five months before settling slightly higher and WTI crude oil struggling most of the session before closing lower.

At 05:51 GMT, May WTI crude oil is trading $62.14, up $0.04 or +0.06% and June Brent crude oil trading $69.28, down $0.12 or -0.17%.

The volatile price action was fueled by trader reaction to the different fundamental factors driving the price action. Expectations of tight global supply underpinned both futures contracts, however, pressure from rising U.S. production based on Wednesday’s U.S. Energy Information Administration’s weekly inventories report, which showed an unexpected build, helped drive Brent higher and WTI lower.

Brent could continue to outpace WTI over the near-term as supply tightens. Furthermore, the international-benchmark has some catching up to do. Global benchmark Brent has gained 30 percent this year, while WTI has gained 38 percent. Prices have been underpinned by tightening global supplies and signs of demand picking up.

Other News

News that trade talks between the United States and China made “good headway” continues to point toward an improving demand picture.

The threat of war in Libya between the North African country’s main political factions could also underpin prices, especially Brent crude as it could lead to involuntary supply disruptions.

U.S. pressure on Iran is increasing, with a senior Trump administration official saying earlier this week that Washington is considering more sanctions on the Middle Eastern country. This should lead to a further tightening of supply.

Daily Forecast

We could see another mixed performance today between Brent and WTI as the longer-term bias remains to the upside. The supply restrictions caused by the OPEC-led supply cuts and the U.S. sanctions against Iran and Venezuela are the main price drivers. However, after this week’s better-than-expected economic numbers from China, the demand picture has improved drastically.

Two wildcards that could trigger a price spike to the upside are the situation in Libya that could lead to supply disruptions, and the announcement of a trade deal between the U.S. and China. Everyone seems to know a deal is imminent; nonetheless, the news could bring in a lot of aggressive speculative buyers.