Oil Price Fundamental Daily Forecast – Evidence of Aggressive Counter-Trend Buyers

Crude oil prices closed higher on Thursday and are in a positon to finish the week stronger as investors put more importance on reports of stronger demand than on reports of higher production by key OPEC exporters.

September West Texas Intermediate Crude Oil settled at $46.20, up $0.54 or +1.18% and international-benchmark October Brent Crude Oil closed at $48.64, up $0.61 or +1.27%.

The bullish news on Thursday included a report that showed China imported 8.55 million barrels per day (bpd) of oil in the first six months of this year, up 13.8 percent on the same period in 2016, making the nation the world’s biggest crude importer ahead of the United States.

In other news, Paris-based IEA issued a stronger outlook for global demand, with consumption in Germany and the United States increasing in recent months.

The IEA also said oil inventories in industrialized nations remains high despite a modest drop in May. OECD stocks are still 266 million barrels above the five-year average.

Finally, the agency also warned that the oversupply could linger for longer than expected due to rising production and limited output cuts by some members of OPEC.

Forecast

Traders had to digest a lot of data this week. Some of it had short-term implications. Some it dealt with longer-term outlooks. This plethora of data was likely confusing to the average investor as well as the professional so I think both determined that price momentum and value were ultimately the most important factors at this time.

I don’t think that the hedge funds, for example, are playing the longer-term outlook for supply and demand. They want movement and the way of least resistance seems to be up at this time. If you recall, the market rallied hard off its low for the year in mid-June. On Monday, we saw similar buying as investors came in following a week long break.

So despite the plethora of forecasts, most of which are bearish, it looks like investors have discounted that news and are willing to play for a counter-trend rally.

Holding above $44.86 on the September WTI futures contract will tell me that buyers are coming in to support the market. Taking out $46.65 then $47.45 will indicate the buying is getting stronger. If these moves take place then I can build a strong case based on technical analysis for a potential move to $49.10 by the end of next week.

The news is likely going to continue to give us two-sided information, but the price action tells me that someone is buying at this time despite all the negativity in the market.