Oil Price Fundamental Daily Forecast – Off-setting Supply/Demand News Suggests Rangebound Trade

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading flat to lower early in the session on Monday. Volume is also extremely light. The price action indicates that the market is being supported by strong demand and falling inventories, but still under pressure from increasing production.

At 0530 GMT, October WTI crude oil is trading $48.91, down $0.06 or-0.12% and November Brent crude oil is trading $51.86, down $0.08 or -0.15%.

The support may be coming from a report from the International Energy Agency (IEA) that showed crude oil stockpiles were now below 2016 levels. However, the markets may not be reacting very strongly to this report because OPEC is targeting the 5-year average with its output cuts. At this time, stocks are 219 million barrels above this level.

The EIA’s latest report also shows an increase in 2017 demand growth to 1.5 million barrels per day (bpd) from 1.4 million bpd in its previous monthly report. The report also showed that the EIA sees expected demand at 1.4 million bpd in 2018.

On the bearish side, the markets remain well supplied thanks to the robust output. Shale production in the largest U.S. oilfield should rise by as much as 300,000 bpd by December, according to industry forecasts.

In other news, according to Baker Hughes energy services, U.S. energy companies added oil rigs for a second time in the last three weeks, extending a 15-month drilling recovery. The report showed drillers added 3 rigs looking for new oil in the week to August 11, bringing the total count up to 768, the most since April 2015.

Forecast

Despite the higher-highs on the daily chart, crude oil has closed lower on the weekly charts for two-consecutive weeks. This may be an indication that investors are losing confidence in the longer-term potential for prices.

The chart pattern suggests investors are waiting to sell rallies. If they decide to step up their pressure at current price levels then prices could become range bound over the near-term.

The first key target area for WTI crude is $48.04 to $47.26. The key area for Brent crude oil is $50.88 to $50.28. Since the main trend is up according to the daily chart, buyers could step in on a test of these zones.

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