Oil Price Fundamental Daily Forecast – Grinding Higher for 7th Session on Supply Concerns

U.S. West Texas Intermediate and international-benchmark Brent crude oil are trading higher early Friday, putting them in a position to post their seventh-consecutive high close. Worries that the sanctions on Iran will cut significant volumes of crude from the market are underpinning the markets today. Some traders are saying gains are being limited by concerns over future demand due to the trade dispute between Washington and Beijing.

At 0635 GMT, October WTI Crude Oil is trading $68.34, up $0.51 or +0.75% and October Brent Crude Oil is at $75.17, up $0.44 or +0.59%.

Traders are also reacting to the tight supply/demand situation which makes the market vulnerable to any supply disruption. Traders are particularly concerned about the supply side of the equation because of the looming U.S. sanctions against Iran, which will target oil exports from November.

The sanctions are expected to strip about 2.5 million barrels per day (bpd) of crude and condensate this year from the market, or about 2.5 percent of global consumption. Analysts also note that Iran is already experiencing a slowdown with tanker loadings already down by around 700,000 bpd in the first half of August relative to July. This is currently ahead of expectations.

Analysts are also saying that during the fourth quarter of 2018, the market will be facing an issue with either undersupply, dwindling spare capacity or both.

While the bullish headlines are driving the price action this week, some traders are still expressing caution due to concerns over Chinese demand and the impact of the US – China trade dispute. The low-level trade talks ended on Thursday with nothing major accomplished. Instead, both countries activated another round of dueling tariffs on $16 billion worth of each other’s goods.

Nonetheless, sources told Reuters on Thursday that China’s Unipec will resume purchases of U.S. crude oil in October after a two-month halt due to the trade dispute. This surprise news puts further emphasis on the supply side of the equation.

WTI futures will strengthen over $68.46 and weaken under $67.59. The key upside target zone and possibly short-term resistance for Brent is $75.29 to $76.22.