Oil Price Fundamental Daily Forecast – Buyers Looking for Bullish Catalyst to Sustain Rally

The news is positive enough to underpin WTI and Brent crude oil, but the absence of a major catalyst means the markets could have trouble overcoming technical resistance today.
James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading slightly higher on Friday with Brent trying to claw back from yesterday’s surprise lower close. The rally continues to be fueled by the OPEC-led production cuts and the U.S.-led sanctions against Iran and Venezuela. There are also reports that these events likely created a slightly deficit in global supply in the first quarter of 2019. Nonetheless, technical resistance and concerns over a global economic slowdown are helping to keep a lid on the rally.

At 09:16 GMT, May WTI crude oil is trading $59.06, up $0.15 or +0.27% and May Brent crude oil is at $67.47, up $0.24 or +0.33%.

In other news, OPEC and its allies are scheduled to meet in Baku, Azerbaijan over the weekend to review its output policy, although most analysts expect the cuts to continue for now.

“We don’t think anything will be agreed this weekend. But, we suspect the group will make noise about the ongoing effort to keep this market in balance,” ANZ bank said on Friday.

Additionally, data analysts Refinitiv said that the combination of the OPEC-led cuts along with output reductions from Iran and Venezuela have had an effect on global crude flow data, leading to expectations of a slight supply deficit in the first quarter.

Demand Concerns Creep into Picture

So far oil demand hasn’t been a major factor influencing the price action, but given the economic slowdown in Asia and Europe, and possibly in North America, it may soon have a major impact on prices.

A recent report from China showed the economic powerhouse imported 6.1 percent more crude oil during the first two months of the year to a record 12.68 million barrels per day, compared to last year.

Furthermore, the U.S. bank said January global crude oil demand growth was “nearly 2.0 million barrels per day, with visible strength in both emerging markets and developed economies”.

Additionally, Goldman Sachs said earlier in the session that “Oil demand concerns are overdone.”

Daily Forecast

The news is positive enough to underpin WTI and Brent crude oil, but the absence of a major catalyst means the markets could have trouble overcoming technical resistance today. For May WTI futures, the key resistance level is $59.63. May Brent’s key level is $67.74. This level helped stop the rally on February 22 when the market was trading $67.84. It also provided resistance on Thursday.

So the bottom-line is, buyers are waiting for bullish news to take out resistance. If there is enough upside momentum today then WTI buyers could drive the market into $59.63. Overtaking this level with conviction could trigger a breakout to the upside. Brent needs to sustain a rally over $67.74 in order to maintain the current upside bias.

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