Oil Price Fundamental Daily Forecast – Higher Weekly Close Could Lead to More Short-Covering Next Week

U.S. West Texas Intermediate and international benchmark Brent crude oil futures are trading lower Friday after an early session rally failed to attract enough buyers to sustain the move.

At 0821 GMT, July WTI crude oil is trading $65.57, down $0.36 or -0.55%, and August Brent crude oil is at $76.81, down $0.45 or -0.58%.

Crude oil prices have been supported this week by supply issues in Venezuela, where state-owned oil firm PDVSA is struggling to clear a backlog of around 24 million barrels of crude waiting to be shipped to customers.

The situation got so bad earlier in the week that the government threatened force majeure that would have effectively cancelled all future delivery contracts. This would have reduced supply in the open market and driven prices higher.

Despite the developing strength in the market, which is likely the result of aggressive short-covering, there are still the major issues of increasing U.S. production and the possibility of increased output from OPEC and other major non-OPEC producers.

OPEC and Russia are due to meet at the organization’s headquarters in Vienna on June 22 to discuss production policy.

Forecast

We’ll continue to look for a two-sided trade until OPEC and Russia make their decision on what to do about supply issues involving Venezuela and Iraq. Typically, the period before a key meeting or announcement is filled with misinformation, leading to a choppy, often volatile trade. We could be going through this at this time.

Technical factors could play a role in today’s price action because a higher close for the week could lead to further short-covering next week. For July WTI crude oil traders, the key number to watch is $64.81. August Brent crude oil traders will be watching the price action and reading the order flow at $76.79.