Oil Price Fundamental Daily Forecast – Getting Support From Drop in Number of Producing U.S. Oil Rigs

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading cautiously higher early Monday. The markets, especially Brent, are being supported by an ongoing North Sea pipeline shutdown and a drop in the number of producing U.S. oil rigs, which may be a sign of a slowdown in production.

At 0700 GMT, February WTI crude oil futures are trading $57.67, up $0.34 or +0.58%. March Brent crude oil futures are at $63.01, up $0.36 or +0.57%.

At the start of the week, crude oil is getting a spark from a decline in the number of producing U.S. oil rigs. According to energy services firm Baker Hughes, energy companies cut rigs drilling for new production for the first time in six weeks, to 747, in the week-ended December 15.

Also supporting the market is the shutdown of the Forties pipeline in the North Sea and last week’s U.S. Energy Information Administration’s (EIA) inventories report which showed stockpiles hitting a two-year low.

The EIA also said that U.S. production is quickly approaching production of 10 million barrels per day. This is helping to undermine the OPEC-led attempt to cut production, trim the excess global supply and stabilize prices.

Supply issues could also be behind the recent downside pressure. Last week, the International Energy Agency (IEA) said global oil markets would show a slight supply surplus of around 200,000 bpd during the first half of 2018.

EIA data showed a similar surplus for that period and still indicate a supply overhang of 167,000 bpd for all of 2018.

The direction of the March Brent futures contract today will be determined by trader reaction to the retracement zone at $63.20 to $63.60.

February WTI crude oil futures are showing a little more strength, crossing to the strong side of a key retracement zone at $57.65 to $57.36. This area could become new support if the rally is sustained.