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James Hyerczyk
Crude Oil
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading basically flat early Tuesday. The price action suggests the news is balanced at this time with risk of oversupply keeping a lid on prices and escalating tensions between the United States and Iran likely providing support.

At 0741 GMT, September WTI crude oil futures are trading $67.75, down $0.13 or -0.21% and September Brent crude oil is at $72.99, down $0.07 or -0.10%.

The daily charts are even looking balanced with both futures contracts straddling key 50% levels or mid-points.

The WTI range is $62.99 to $72.98. Its 50% level or mid-point is $67.99. Brent’s range is $65.82 to $80.05. It mid-point is $72.94. Trader reaction to these mid-points will likely determine the near-term direction of the market, however, not until there is a major catalyst.

Prices were supported early Monday after President Trump warned of dire consequences for Iran if it threatened the United States. However, since this news didn’t have a real effect on supply, prices retreated later in the session.

The fundamentals are stacked in favor of the bears at this time. Saudi Arabia and large producers are ramping up output to offset losses that are likely to come as the November deadline for the start of the sanctions against Iran approaches. However, there is not much room for error or any additional supply disruptions because of limited spare capacity.

Forecast

Tuesday’s American Petroleum Institute’s weekly inventories report could start the ball rolling this week later in the session today. Adding to the volatility will be Wednesday’s U.S. Energy Information Administration’s weekly inventories report. Last week, it helped put in the bottom.

According to information from analysts at Genscape, U.S. crude inventories at the delivery hub at Cushing, Oklahoma gained in the four days to Friday. On a weekly basis, stockpiles at the hub were expected to fall for the 10th consecutive week, traders said.

Barring any major news today, the direction of the WTI futures contract will likely be determined by trader reaction to $67.99. The direction of the Brent contract will be determined by trader reaction to $72.94.

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