Oil Price Fundamental Daily Forecast – Lower, but Stable as Traders Await Iran’s Decision on Nuclear Deal
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Tuesday after fears of lower demand and increasing supply rattled traders into aggressively selling the previous session.
Despite the cluster of bearish fundamental news on Monday, traders still recognized value with both markets finding support inside the major retracement zones that are controlling the near-term direction of the crude oil market. These areas have survived several challenges since late June.
At 05:49 GMT, October WTI crude oil is trading $88.18, down $0.67 or -0.75% and December Brent crude oil is at $92.62, down $0.78 or -0.84%. On Monday, the United States Oil Fund ETF (USO) settled at $72.91, down $2.07 or -2.76%.
Bearish Factors Piling Up
WTI and Brent crude oil plunged on Monday after a series of negative events chased bullish traders out of their weak positions.
The selling actually started on Friday after a damaged oil pipeline component that disrupted output at several offshore U.S. Gulf of Mexico platforms was repaired late Friday. That prompted oil producers to reactivate some of the halted production, putting a bearish spin on crude oil prices early Monday.
The early weakness was compounded after disappointing Chinese economic data renewed concerns of a global recession that would be expected to reduce fuel demand. Also in China, the country’s refinery output slipped to 12.53 million barrels per day (bpd), its lowest since March 2020, government data showed.
A stronger U.S. Dollar also weighed on foreign demand for dollar-denominated crude. Talks to revive the 2015 Iran nuclear deal, which will lead to increased demand was another excuse to sell crude.
Crude oil could have a hard time mounting a reasonable rally over the short-run unless there is an unexpected supply disruption. Although there could be a bounce if Iran rejects the latest Nuclear Deal proposal.
If there is any good news to report, it’s that traders may be recognizing value for the October WTI futures contract at $88.26 to $81.85 and for the December Brent futures contract at $90.95 to $85.25.
Short-term, traders are awaiting industry data on U.S. crude stockpiles from the American Petroleum Institute (API) at 20:30 GMT and on Wednesday from the Energy Information Administration (EIA) on Wednesday. Both reports are expected to show draw downs in oil and gasoline, and a rise in distillate inventories.
One month out, an EIA report showed total output in the major U.S. shale oil basins will rise to 9.049 million bpd in September, the highest since March 2020.