Oil Price Fundamental Daily Forecast – Early Weakness Suggests Traders Looking for Value Zone
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Monday. The U.S. contract is feeling the most pressure on concerns over rising inventories and production. Brent futures are having trouble with a major technical resistance level at $71.77. Gains are being limited by worries over future demand, but the markets remain underpinned by tighter global supplies.
There weren’t any major events over the week-end. Last week, WTI was pressured by a huge build in inventory. Better-than-expected trade balance data from China provided a little support. Both futures contracts reached five-month highs, but there was little follow-through to the upside.
Overall, both WTI and Brent remained underpinned by the OPEC-led production cuts, which have worked to trim the excess global supply while stabilizing prices. However, there remain worries about future demand due to signs of a slowing global economy. Additionally, the International Monetary Fund cut its global growth forecasts.
In other news, energy services firm Baker Hughes on Friday, reported that the number of active U.S. rigs drilling for oil rose by two to 833 last week. That followed an increase of 15 oil rigs the week before.
Money managers raised their net long U.S. crude futures and options positions in the week to April 9, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
In the absence of major supply or demand news, traders are focused on the turmoil in Libya that could cause a supply disruption and whether Russia decides to continue to be a part of OPEC’s plan to reduce production.
On Friday, the head of Libya’s National Oil Corp. warned that renewed fighting could wipe out crude oil production in the country.
“Supply side issues remained a concern for the market, Libyan rebel leader Khalifa Haftar moved forces closer to Tripoli,” ANZ Bank said in a research note.
Looking ahead, OPEC and its allies will meet in June to decide whether to continue withholding supply. De facto leader Saudi Arabia wants to keep cutting, but may decide to raise output in July if disruptions continue elsewhere.
Finally, Russia’s Finance Minister Anton Siluanov was quoted by the TASS news agency as saying on Saturday that Russia and OPEC may decide to boost production to fight for market share with the United States, but this would push oil prices as low as $40 per barrel.
Basically, June Brent crude needs to overcome and sustain a rally over $71.77, and June WTI crude oil must hold $63.48 to sustain the strong upside bias.