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Oil Price Fundamental Daily Forecast – Early Price Action Suggests Rally May Have Exhausted Buyers

By:
James Hyerczyk
Published: Jun 29, 2018, 07:52 UTC

Brent crude oil remains firm because looming sanctions by the White House against Iran are expected to lead to a sharp drop in supplies from the OPEC-member. WTI crude oil is being supported by supply disruptions in Canada.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil are trading mixed early in the session of Friday. Some traders are saying this indicates some light profit-taking is taking place. Both futures contracts are trading inside yesterday’s range which suggests investor indecision and impending volatility.

At 0733 GMT, August WTI crude oil futures are trading $73.24, down $0.21 or -0.27% and September Brent crude oil is at $77.68, up $0.07 or +0.09%.

Traders are also saying that all the major shorts may have been taken out with this week’s rally and that the buyers may have exhausted themselves. This usually means that the buyers may not be willing to chase this market higher at current price levels, and may be looking for value on a pullback.

Fundamentally, international Brent crude oil remains firm because looming sanctions by the White House against Iran are expected to lead to a sharp drop in supplies from the OPEC-member.

WTI crude oil is being supported by supply disruptions in Canada. North America’s oil markets have tightened significantly this week as an outage of Canada’s Syncrude has locked in over 300,000 bpd of production. The outage is expected to last at least through July, according to operator Suncot.

Besides the looming U.S. sanctions against Iran, which is fueling the rally in Brent futures, and the outage in Canada, which is supporting WTI crude, both markets are also benefitting from supply issues in Venezuela and Libya.

As far as demand is concerned, it has been making records all year, and OPEC has said it will raise output in order to meet demand and replace crude from unplanned disruptions. However, concerns have been raised this week that a trade war may cause a slowdown in global economic growth. This could lead to lower demand.

So the debate amongst traders at this time is whether there will be a surplus or a deficit in crude oil supply later this year when OPEC meets to determine its plan for next year.

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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