Oil Price Fundamental Daily Forecast – Needs Bullish News to Take It to the Next Level

U.S. West Texas Intermediate crude oil and international-benchmark Brent crude oil are trading flat early Tuesday. Supporting the market is a fall in Saudi Arabian crude exports, however, gains have been limited by an expected rise in U.S. shale output.

According to the U.S. government, U.S. shale production is expected to rise for a 10^th month in a row in October. Late Monday, the U.S. Energy Information Administration’s monthly drilling productivity report, showed that output across seven shale areas is forecast to rise by nearly 79,000 barrels per day (bpd) to 6.1 bpd.

Another report from Saudi Arabia showed crude exports fell to 6.693 million bpd in July, down from 6.889 million bpd in June.

Although U.S. shale production is expected to rise for a 10^th moth in row in October, some traders are saying that production is actually moderating. The prediction of nearly 79,000 barrels per day actually market the first time in seven months EIA’s growth forecast came in below 100,000 barrels a day.

Production from Eagle Ford, a major production area in Texas, was revised down due in part to impacts from Hurricane Harvey. The storm forced some drillers to idle rigs last month as the devastating storm approached southeastern Texas.

Oil traders have been bracing for a slowdown in the U.S. oil patch because a weekly count of rigs has been falling recently. Baker Hughes reported on Friday that its U.S. rig count fell by seven rigs to the lowest level since June.

Forecast

The price action suggests investors are waiting for fresh news. Yesterday’s reports just confirmed what the market has already priced in that the Saudi’s have cut exports and that U.S. shale production is still high.

Actually, I think the news was more bullish than the price action reflected.

The news that could trigger an extension of the rally is an announcement that OPEC and the other producers have decided to extend the production cuts beyond the current deadline.

The current price action is still indicating that traders are torn between buying strength, and waiting for a dip into support. If there is bullish news, they’ll buy strength. If there is no news then prices are likely to drift lower into support over the near-term.

Later today, traders will get the opportunity to react to the latest weekly inventories report from the American Petroleum Institute. On Wednesday, the EIA will report its weekly inventories figures. The report is expected to show a build of 2.8 million barrels.