Oil Price Fundamental Daily Forecast – Markets Firm as Investors Await Weekly Rig Count

U.S. West Texas Intermediate and internationally favored Brent crude oil futures gave back most of their earlier gains but still managed to close higher for the sixth straight session. Early Friday, both futures contracts are trading inside yesterday’s range, suggesting investor indecision and impending volatility.

AT 0600 GMT, August WTI crude oil is trading $45.21, up $0.28 or +0.62% and September Brent crude oil is at $47.89, up $0.26 or +0.55%.

A combination of profit-taking and short-covering has been behind the lengthy rally. The market received a boost on Wednesday after the U.S. government reported a decline in weekly U.S. production. The news carried over into Thursday’s session. This helped alleviate a few of the lingering concerns over the global supply glut.

A weaker U.S. Dollar also helped boost dollar-denominated crude because of increased foreign demand, however, the primary driver of the bullish price action was the Energy Information Administration’s report from Wednesday that showed domestic crude production dropped by 100,000 barrels per day (bpd) to 9.3 million bpd the week-ending June 23, the steepest weekly fall since July 2016.

Forecast

Crude oil futures are in a position to post their biggest weekly gain since mid-May, ending five weeks of losses with prices underpinned by a decline in U.S. output.

U.S. crude futures are currently up about 4.6 percent for the week, while benchmark Brent has gained 4.2 percent. That marks the biggest rise for both markets since the week-ending May 19.

Investors know that crude oil hit a 10-month low last week in the face of a mounting supply glut. They also know that a firm North Sea crude oil market is starting to show signs of long-lost strength.

Both moves suggest that some of the pessimism that has driven down oil futures this month and created record short positions against a prolonged rally may be unjustified. This being said, bearish short sellers have been reluctant to refresh positions at current price levels.

Bullish traders may not be too excited about taking aggressive long positions yet, but this week’s price action suggests that weaker shorts are a little uncomfortable and are willing to book profits.

Today’s early price action suggests the direction of the market today will be determined by the weekly rig count. Bullish traders are hoping that the reported decline in U.S. output means producers reduced the number of oil rigs this week.