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Oil Price Fundamental Daily Forecast – OPEC-led Production Cuts Providing Most Support

By:
James Hyerczyk
Published: Feb 4, 2019, 04:18 UTC

Prices should continue to be supported this week as long as the outlook for a trade deal remains positive. At this time, the market is counting on the meeting between President Trump and Chinese President Xi Jinping, which could take place within two weeks, to provide underlying support.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower early Monday as buyers continue to take a cautious approach despite signs of tightening supply and fresh optimism over U.S.-China trade relations. Both events and Friday’s stronger-than-expected jobs and factory activity data are also helping to ease concerns over weaker economic U.S. growth.

At 03:44 GMT, March WTI crude oil is trading $55.18, down $0.08 or -0.14% and April Brent crude oil is at $62.63, down $0.12 or -0.19%.

OPEC-led Production Cuts Providing Support

Although prices were influenced by various factors last week, the main story supporting the market and driving the price action is the OPEC-led production cuts.

Last week, prices were supported by a report from OPEC, which showed oil supply fell in January by the largest amount in two years despite Russia’s sluggish output cuts, which failed to meet its pledged amount.

Russian oil output declined to 11.38 million barrels per day (bpd) in January, or by around 35,000 bpd from the October 2018 level, the baseline for a global oil accord to curb production, missing the deal’s target, Energy Ministry data showed on Saturday.

Russian Energy Minister Alexander Novak has said the country’s overall cuts would total 50,000 bpd in January from October. Russia has pledged to reduce oil output by 230,000 bpd from October.

Venezuelan Sanctions Providing Unexpected Support

Some U.S. refiners have begun reducing crude processing as sanctions have boosted oil costs and as gasoline margins crashed to their lowest in nearly a decade, market sources told Reuters last Thursday.

U.S.-China Trade Deal Hopes

Recent reports from China, the U.K. and the Euro Zone have pointed toward a slowing global economy, but crude oil investors have taken this data in stride after the positive outcome of last week’s U.S.-China trade talks. Crude oil prices are being supported by reports that the two economic power houses have made significant progress towards ending the trade dispute.

Daily Forecast

Prices should continue to be supported this week as long as the outlook for a trade deal remains positive. At this time, the market is counting on the meeting between President Trump and Chinese President Xi Jinping, which could take place within two weeks, to provide underlying support. They are expected to try to seal a comprehensive trade deal, however, it is still not clear to traders whether a deal could be reached. This is why investors are being cautious.

With the start of China’s Lunar New Year, it’s difficult to say whether there will be any significant developments between February 5 and February 19, when the festivities end.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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