Oil Price Fundamental Daily Forecast – Looking Top-Heavy as Bearish Headline Off-set Bullish Headlines

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday after surging to a five-month high the previous session. However, while the OPEC-led production cuts and U.S. sanctions against Iran and Venezuela, have been working well to trim the excess global supply, renewed concerns over rising U.S. production and a global economic slowdown, are beginning to exert a bearish influence on the rally.

At 08:49 GMT, June WTI crude oil futures are trading $64.27, down 38 or-0.59% and June Brent crude oil is at $71.43, down $0.31 or -0.43%.

Bullish Supply News

Global supply remains tight amid the supply cuts led by OPEC and its allies including Russia. U.S. sanctions on oil exporters Iran could lead to further tightening when the U.S. lifts the waivers to continue to buy Iranian oil from a number of countries. Meanwhile, the U.S. is expected to continue to enforce the sanctions against Venezuela as turmoil continues in rogue South American country. Furthermore, over the past week, traders have become concerned about the rising geopolitical risk in Libya that threatens to disrupt supply.

Bearish Demand News

This week, concerns were raised over future demand after the International Monetary Fund (IMF) lowered its growth forecast for the second time this year and the third time in six months.

The IMF now sees global growth of 3.3% this year, down two-tenths from January, and four-tenths from October, followed by 3.6% growth in 2019.

“Industrial production figures and surveys of purchasing managers suggest that the slower momentum in global growth during the second half of 2018 is likely to continue in early 2019,” the IMF said in its latest world economic outlook.

U.S. Stockpiles Continue to Surge

On Wednesday, a U.S. government report showed U.S. crude stockpiles surged to their highest levels in almost 17 months amid record production and as economic concerns cast doubt over growth in demand for fuel.

The Energy Information Administration (EIA) said on Wednesday that U.S. crude inventories rose 7 million barrels to 456.6 million barrels in the last week, their highest since November 2017. Furthermore, U.S. crude oil production remained at a record 12.2 million barrels per day (bpd), making the U.S. the world’s biggest oil producer ahead of Russian and Saudi Arabia.

Daily Forecast

The price action this week suggests WTI and Brent crude oil may be reaching some kind of a balance point where bearish headlines are off-setting bulling headlines, causing very little movement. However, heavy fund buying has been able to keep prices buoyed. If this market is going to roll over to the downside, it is going to take a combination of increased concerns over demand and a shift in investor sentiment to do so.

WTI traders are keeping an eye on trader reaction to $63.48. Prices could begin to plunge if this level fails as support. Brent futures traders will be watching trader reaction to $71.77. This is the key area that must be overcome to sustain the rally.