Oil Price Fundamental Daily Forecast – Demand Concerns Outweighing Supply Worries

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed on Tuesday, but primarily rangebound. In a flip of the recent trend, WTI is outperforming Brent today. This move was even more evident on Monday when WTI finished higher and Brent closed lower. Renewed tensions over U.S.-China trade relations are helping to keep prices from pushing higher.

At 08:47 GMT, July WTI crude oil is trading $63.35, up $0.14 or +0.22% and August Brent crude oil is at $71.10, down $0.06 or -0.08%.

Although there were comments on Sunday from the Saudi’s regarding the extension of production cuts beyond June, for the most part, OPEC and its allies have remained quiet.

Citigroup Inc. analysts wrote in a report, “OPEC+ is staying on the sidelines for now, reluctant to add significant volumes to markets so long as overall measures of inventories remain apparently adequate.” The bank is “cautiously optimistic a trade war will result in at least an interim trade deal this year.”

Supply Cut Extension Bullish

The OPEC-led supply cuts have been the primary driver of this year’s rally. So the possible extension of the production curbs could be the catalyst that triggers a resumption of the move. However, since the coalition is not scheduled to meet until the end of June, WTI and Brent prices could flounder for another month.

Involuntary Output Cuts Have Been Neutralized

The U.S. sanctions on Iran and Venezuela and the rising tensions in the Middle East have also been supportive for prices, but the stalemate in U.S.-China trade negotiations have been keeping gains in check because of worries over a global economic slowdown, which could lead to lower future demand.

Daily Forecast

We’re looking for a sideways to lower trade on Tuesday with the fundamentals basically neutralized by the combination of potentially bullish and bearish scenarios taking place at this time.

There is hope for the bulls, however, but this is unlikely to rear its head until OPEC and its allies meet late month.

Over the week-end, oil ministers from Saudi Arabia and other OPEC producers said at their meeting in Jeddah that they were inclined to extend the production cuts into the second half of 2019. Saudi Arabia’s Al-Falih even said the market is still fragile, while suggesting he is open to relaxing the cuts.

Late Tuesday at 20:30 GMT, traders will get the opportunity to react to the weekly American Petroleum Institute’s inventories report. This report is important because of increasing concerns over rising stockpiles and production.

Finally, heightened tensions over U.S.-China and U.S-Iran relations, remain the wildcards.