Oil Price Fundamental Daily Forecast – Early Trade Suggests Tightening Concerns Driving Price Action

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher early Monday, but inside Friday’s range. The price action suggests investor indecision and impending volatility as investors continue to try to find the balance between concerns over a tight market and expectations of lower future demand due to the lingering trade issues.

At 0707 GMT, November West Texas Intermediate Crude Oil futures are trading $68.92, up $0.16 or +0.23% and December Brent Crude Oil is at $77.80, up $0.19 or +0.24%.

Today’s early theme is nearly a reversal from the theme at this time a week ago. Last week, investors were driving prices higher on expectations of shortages. Since late last week and extending into today’s early trade, the focus for traders has been on ample supplies.

In other news on Friday, Baker Hughes reported that the number of active U.S. rigs drilling for oil rose by 7 to 867 the week-ending September 14. The oil-rig count had fallen 2 the previous week. The total number of active oil and gas rigs now stands at 1055.

Canada’s oil and gas rigs for the week picked up 22 rigs last week after losing 24 rigs the previous week, bringing its total oil and gas rig count to 226.

Forecast

The early price action and the relatively low volume suggests we’re likely to see a rangebound trade today. Traders may be taking a breather from last week’s volatile, two-sided price action.

At the start of the session today, the offsetting issues remain the same. On the bullish side, investors are worried about the impact of the U.S. sanctions on oil supply. They are betting that slashing Iran’s exports will cause a tightening in the market.

Other bullish factors include the economic turmoil in Venezuela and the violence in Libya’s oil rich areas.

Bearish traders are banking on Saudi Arabia and other non-OPEC producers to make up most of the shortfall from the Iran sanctions. Furthermore, they are also counting on a drop in global demand due to the trade dispute between the United States and China.

While we’re leaning toward a mostly sideways trade today, we are open to the possibility of a sell-off if the Trump administration announces new tariffs on about $200 billion on Chinese imports.

On the charts, December Brent crude will develop an upside bias on a sustained move over $77.50, and a downside bias on a sustained move under $77.00.

November WTI crude oil will develop an upside bias on a sustained move over $68.78 and a downside bias on a sustained move under $68.28.