Oil Price Fundamental Daily Forecast – Firmer Dollar, Flight to Safety Buying Pressuring Prices

U.S. West Texas Intermediate and internationally-favored Brent crude oil futures were trading lower on Tuesday, extending their losses from the previous session. Traders were reacting to the shedding of risky assets and commodities although there were some concerns over rising U.S. production.

At 0707 GMT, March WTI Crude Oil is trading $63.49, up $0.66 or -1.02%. April Brent Crude Oil is at $66.90, down $0.72 or -1.06%.

Sellers didn’t seem to be too concerned about any specific oil-related fundamentals. Their focus appeared to be on the downside momentum being generated by the stock market sell-off.

Brent crude oil is the most bearish futures contract. Its trend is down according to the daily chart. If the downside momentum continues, the selling could extend into $66.03 to $64.91.

The WTI futures contract also changed its trend to down on Monday. This occurred when sellers took out $63.67. If the downside momentum continues then look for the selling to extend into the next main bottom at $62.78. This price is a possible trigger point for an acceleration into at least $61.37.

The current weakness can also be tied to a firmer U.S. Dollar. Investors jumped into the U.S. Dollar as a safe currency. The stronger dollar helped drive down foreign demand for dollar-denominated crude oil.

Concerns over another build in U.S. crude oil inventories could also be weighing on prices. Last week, the U.S. Energy Information Administration’s inventories report showed that soaring shale oil production increased to 10 million barrels per day (bpd), surpassing top exporter Saudi Arabia.

Traders are also concerned about the rise in the amount of rigs drilling for oil, currently at 765, more than double the 316 that were in operation during 2016’s production lull.

Finally, traders anticipate a seasonal downturn to demand, as many refineries shut for maintenance at the end to the peak-consumption winter season in the northern hemisphere.

The direction of the stock market could drive the price action later in the session. However, the true direction of prices today will likely be determined by late Tuesday’s American Petroleum Institute’s weekly inventories report.