Oil Price Fundamental Daily Forecast – IEA Warning on Spare Capacity Continues to Underpin Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower shortly before the regular session opening. The markets are trading inside yesterday’s range which suggests investor indecision and a fresh round of volatility.

At 0900 GMT, September West Texas Intermediate crude oil futures are trading $68.98, down $0.37 or -0.55 percent and September Brent crude oil futures are at $73.82, down $0.63 or -0.86 percent. Both futures contracts are positioned to post lofty losses for the week of more than 4 percent.

On the bearish side this week, the surprise announcement by Libya to return oil to the market is being blamed for triggering steep losses on Wednesday. Traders are also concerned about the escalating trade dispute between the United States and China, which could lead to Beijing placing sanctions on U.S. crude imports.

On the bullish side, a new warning on spare capacity by the International Energy Agency (IEA) is helping to underpin prices, especially Brent crude oil. The IEA warned that spare capacity may be stretched as OPEC and Russia increase production.

The IEA cautioned that the world’s oil supply cushion “might be stretched to the limit” due to production losses in several different countries.

Forecast

We could be looking for a steady trade today as investors continue to lick their wounds following Wednesday’s plunge. Barring any surprise announcement from OPEC, the market is likely to be supported today by relatively strong demand, falling inventories and the IEA’s warning about losing spare capacity. Helping to keep a lid on prices will be rising production from Middle East Gulf countries, Russia and US. shale producers.