Oil Price Fundamental Daily Forecast – Momentum Traders Need Bullish News, or Markets Will Pull Back into Support

U.S. West Texas Intermediate and international-benchmark Brent crude oil closed mixed on Wednesday as traders responded to overbought technical conditions and a surprise fall in inventories as reported by the government.

November WTI crude oil futures settled at $52.14, up $0.26 or +0.50% and December Brent crude oil finished the day at $57.57, down $0.35 or -0.60%.

According to the U.S. Energy Information Administration, U.S. crude oil inventories fell 1.8 million barrels the week-ending September 22. Traders were looking for a 3.4 million-barrel build.

The EIA news provided some support for WTI crude oil, but gains were limited by an unexpected rise in gasoline stocks. Distillate stocks were down but less than anticipated.

Also pressuring prices and limiting gains was an increase in U.S. crude production. The EIA reported that production rose to 9.55 million barrels per day (bpd) last week, higher than before Hurricane Harvey hit the Texas Gulf Coast area.

Expensive Brent crude oil also drove up demand for cheaper U.S. crude oil. Exports hit a record 1.5 million barrels per day last week.

Forecast

The technical reversal tops formed on September 26 in the WTI and Brent futures markets continue to control the price action. These charts patterns typically indicate the selling is greater than the buying at current chart patterns. They do not necessary indicate a change in trend, but rather a potential shift in momentum.

For the bullish trader, taking out the WTI high at $52.43 and the Brent high at $58.87 will signal a resumption of the uptrend. But to entice investors to buy strength in order to take out this high, there is going to have to be a bullish event.

Investors just don’t buy strength in crude oil because they think prices will be higher in the future. They buy strength when something forces them to think they are going to miss an opportunity and be forced to pay higher prices later.

Therefore, I have to conclude that prices will sit under the recent tops until there is credible news about increasing demand or lower supply.

If the news isn’t convincing enough to encourage investors to buy strength then momentum will shift to the downside, indicating they are looking to buy inside a value zone. The best value zone at this time comes in at $50.01 to $49.44.

So at this time, you have to know what kind of player you are in this market. A news driven momentum buyer or a value-seeking investor.