Oil Price Fundamental Daily Forecast – Major Players Reluctant to Take Positions Ahead of OPEC Meeting

U.S. West Texas Intermediate and international-benchmark Brent crude oil settled mixed on Thursday. The gain by the U.S. market and the loss by the internationally-favored brand helped tighten the spread between WTI and Brent.

Heading into next week’s June 22-23 OPEC meeting in Vienna, attendees are going to have to address rising U.S. output and uncertainty over the outlook for supply because of economic turmoil in Venezuela and the upcoming sanctions against Iran. However, given the recent limited gains, it looks as if investors have priced in the possibility OPEC and other major producers will agree to higher output.

WTI and Brent crude oil are trading nearly flat early Friday amid concerns that oil giants Saudi Arabia and Russia are going to push for increased production at next week’s OPEC meeting.

At 0622 GMT, August WTI Crude Oil is trading $66.70, up $0.02 or +0.02% and August Brent Crude Oil is at $75.87, down $0.07 or -0.09%.

The notion that Saudi Arabia and Russia will push for more output was supported by Russian Energy Minister Alexander Novak who said after talks with Saudi Energy Minister Khalid al-Falih in Moscow that both nations “in principle” supported the gradual exit from the deal that was aimed at trimming the global supply and stabilizing prices.

“We in general support this … but specifics we will discuss with the ministers in a week,” Novak said, adding that one option would involve gradually hiking output by 1.5 million bpd, possibly starting from July 1.

Saudi Falih did not offer specific guidance on what any deal in Vienna could look like. But he said:  “We will see where we go, but I think we’ll come to an agreement that satisfies, most importantly, the market.”

We continue to expect to see a choppy, two-sided trade going into next week’s OPEC meeting since the major players are not likely to take a position with so much uncertainty in the air. Thin trading conditions are could allow the market to be pushed in both directions as investors are likely to react to the headlines.

We could see an upside bias develop on a sustained move over $66.85 with $68.41 the minimum target. A move through $66.34 could create a downside bias with small targets at $64.44, $64.79 and $64.15.