Oil Price Fundamental Daily Forecast – Investors Eyeing U.S. Production; Geopolitical Events

International Brent and U.S. West Texas intermediate crude oil are trading flat to lower early in the session on Wednesday. The light volume suggests investors are still in holiday-mode due to the U.S. Independence Day holiday on Tuesday. With the U.S. Energy Information Administration’s weekly inventories report postponed until Thursday, volume and price action could remain repressed today.

At 0414 GMT, August WTI crude oil is trading $46.98, down $0.10 or -0.21% and September Brent crude oil is trading 49.57, unchanged.

Early in the session, traders are saying the geopolitical tensions in the Korean peninsula are underpinning the market while prices remain capped due to ample supply despite OPEC’s attempt to curtain production.

With both WTI and Brent futures up about 12 percent since May’s multi-month low which technically put crude oil in a bear market, some traders are also saying the recovery may have been too much, too soon, leaving them vulnerable to a near-term correction.

Traders have been focusing lately on the supply and demand situation, but today’s early price action is being fueled by rising global security risk following another North Korean missile test and the lingering political crisis between Qatar and an alliance of Arab nations let by Saudi Arabia and the United Arab Emirates.

Forecast

Thin trading conditions could mean that crude prices will be manipulated today by news headlines and external events. However, the focus for traders should continue to remain on U.S. oil production and the rig count. These two events helped fuel the market last week.

Some bearish traders are saying that last week’s reported 100,000 barrel per day drop in U.S. production was caused by tropical storms and maintenance and that it’s too early to call it a trend. Others are also saying that the 2 rig drop in the number of producing wells is not a trend.

Thursday’s EIA report is expected to show a 2.4 million barrel draw down.

In the absence of any major supply/demand news today, the direction of the September Brent crude oil market is likely to be determined by trader reaction to $49.78. The key level to watch for August West Texas Intermediate crude oil traders is $47.14.