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Oil Price Fundamental Daily Forecast – Demand Drop Means Slow Grind Lower, Supply Disruption Means Spike Higher

The daily chart looks volatile, but the weekly chart is rangebound. With concerns about demand pressuring prices and worries over supply being fueled by the sanctions on Iran, the next major move is likely to be triggered by unexpected news. Usually this comes in the form of a supply disruption.
James Hyerczyk
Crude Oil
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower early Monday. There has been no follow-through to the upside following Friday’s dramatic reversal to the upside. The markets are currently trading inside Friday’s range which suggests investor indecision and impending volatility.

At 0708 GMT, October WTI crude oil futures are trading $66.70, down $0.25 or -0.36% and October Brent crude oil is trading $72.56, down $0.25 or -0.34%.

Concern over falling fuel demand especially in Asia is behind the selling pressure although the market is being somewhat supported by tighter supply due to the U.S. sanctions against Iran.

Depending on the order flow, it’s difficult to choose a direction because of the conflicting supply/demand fundamentals. Prior to last week’s steep sell-off, which was fueled by new tariffs from China, the markets were trading higher for the week and in a position to challenge the previous week’s high because of the sanctions.

The daily chart looks volatile, but the weekly chart is rangebound. With concerns about demand pressuring prices and worries over supply being fueled by the sanctions on Iran, the next major move is likely to be triggered by unexpected news. Usually this comes in the form of a supply disruption.

If we start to see evidence of a global economic slowdown or a drop in demand, then crude oil is likely to grind lower. However, if we see a supply disruption, prices could spike to the upside. This is essentially what the International Energy Agency warned about in its monthly report released late last week.

In other news, hedge funds and other money managers reduced their bullish positions in U.S. crude futures and options in the week ending on August 7, data from the U.S. Commodity Futures Trading Commission showed on Friday.

The speculator group cut its combined net-long position in New York and London by 9,117 contracts to 397,885 during the week, the lowest since June 19, the data showed.

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