Oil Price Fundamental Daily Forecast – Counter-Trend Buyers Pinning Hopes on Production Cuts, Trade Deal

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher shortly before the regular session opening, reversing earlier weakness. Although today’s early sell-off contributed to the largest one-month decline in crude oil since the financial crisis of 2008, the intraday technical reversal is the first sign in weeks that the buying may be greater-than-the-selling at current price levels.

At 1300 GMT, January WTI crude oil is trading $50.97, up $0.68 or +1.35% and January Brent crude oil is at $59.42, up $0.66 or +1.12%.

Fundamentally, investors remain concerned about the continuous flow of U.S. supply along with new worries that Saudi Arabia is insisting that it will not cut production on its own to stabilize supply and prices.

Yesterday’s huge stock market rally and the plunge in the U.S. Dollar offered no relief from the selling in the dollar-denominated commodity.

Russian President Vladimir Putin contributed to the weakness when he said he was satisfied with an oil price of $60. However, he stands ready to work with OPEC to control supply if needed.

In other words, U.S. crude inventories hit their highest level in a year after a tenth consecutive weekly increase, and are now only 80 million barrels below March 2017’s record 535 million barrels, according to the Energy Information Administration.

Forecast

The supply and demand fundamentals remain bearish, but the early price action suggests the technical picture may be improving. A higher close today, for example, will form a potentially bullish closing price reversal bottom. For WTI futures, a trade through $52.56 will change the trend to up on the daily chart.

The counter-trend buyers may be pinning their hopes on the announcement of production cuts at next week’s OPEC meeting in Vienna. Traders are looking for supply cuts between 1 million and 1.4 million barrels per day (bpd).

Bullish counter-trend traders are also hoping for some movement on global trade issues when the United States and China hold discussions at the G20 summit this week-end in Argentina.