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Oil Price Fundamental Daily Forecast – Buyers Cautiously Optimistic Over OPEC cuts, Possible Trade Deal

By:
James Hyerczyk
Published: Jan 18, 2019, 10:49 UTC

With the bullish OPEC news basically offsetting the rise in U.S. production, it looks as if the wildcard remains the potentially bullish U.S.-China trade deals. The market may continue to be underpinned as long as the trade deal talk remains positive.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Friday in reaction to bullish news regarding OPEC production and speculation over the U.S.-China trade dispute. Increasing demand for higher risk assets continues to underpin prices, however, concerns over rising U.S. production may be putting a lid on today’s gains.

At 1029 GMT, March WTI crude oil is trading $53.02, up $0.66 or +1.27% and March Brent crude oil is at  $61.89, up $0.71 or +1.16%.

According to a new report from OPEC, Saudi Arabia, other major OPEC producers and Russia, cut oil production sharply in December before a new plan to limit supply took effect on January 1. The report released on Thursday, suggests that producers are moving quickly on the plan to trim the excessive global supply and stabilize prices.

The details of OPEC’s monthly report shows that oil output fell by 751,000 barrels per day (bpd) in December to 31.58 million bpd, the biggest month-on-month drop in almost two years.

Despite its current success with production cuts, OPEC also cut its forecast for average daily demand for tis crude in 2019 to 30.83 million barrels, down 910,000 bpd from the 2018 average.

The OPEC news is potentially bullish, but traders remain cautious because of the rising U.S. production. According to the latest report from the U.S. Energy information Administration, U.S. production increased by more than 2 million bpd in the last year to an unprecedented 11.9 million bpd.

With the bullish OPEC news basically offsetting the rise in U.S. production, it looks as if the wildcard remains the potentially bullish U.S.-China trade deals. The market may continue to be underpinned as long as the trade deal talk remains positive.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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