Oil Price Fundamental Daily Forecast – OPEC Sees Surplus Due to Lower 2020 Demand

Keep in mind that the weather concerns and the near-skirmish between Britain and Iran are short-term events. Therefore, we could see a pullback today, following yesterday’s price surge. Furthermore, we’re going to have to see actual prolonged supply disruptions to trigger huge moves to the upside.
James Hyerczyk
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Thursday and in a position to breakout to the upside on the back of several developing supply concerns. Technical factors are also contributing to the strength in the markets with both futures contracts crossing to the bullish side of their respective 200-Day Moving Averages the previous session. This chart pattern tends to be attractive to hedge fund buyers.

At 11:01 GMT, September WTI crude oil is trading $60.80, up $0.28 or +0.46%. September Brent crude oil is at $67.32, up $0.31 or +0.46%.

The main catalysts behind today’s strength are production concerns due to a developing storm in the Gulf of Mexico, heightened tensions in the Middle East and another large drawdown in U.S. stockpiles.

Oil Rigs Evacuated Ahead of Storm

According to reports, U.S. oil producers cut nearly a third of their output in the Gulf of Mexico ahead of what may develop into one of the first major tropical storms of the 2019 hurricane season.

Fifteen production platforms and four rigs were evacuated in the north central Gulf of Mexico, according to a U.S. regulator.

Iran Creates ‘Disturbance’ with Britain

Three Iranian vessels tried to block the passage of a British ship run by BP through the Strait of Hormuz, the British government said. They withdrew after warnings from a British warship. Although prices rose in response to the news, apparently the event was anticipated after Iran warned Britain would face “consequences” over the seizure of an Iranian oil tanker.

According to Petromatrix oil analyst Olivier Jakob, “They might have created a little bit of disturbance, but nothing came out of it. For now we are in the process of intimidation and psychological warfare…. To have a strong price reaction you need something to really happen.”

U.S. Government Reports Another Big Draw

On Wednesday, the U.S. Energy Information Administration (EIA) reported crude stocks fell 9.5 million barrels in the week to July 5. Traders were looking for a 3.1 million-barrel draw. Traders said the decline was caused by ramped up refinery output.

Daily Forecast

Keep in mind that the weather concerns and the near-skirmish between Britain and Iran are short-term events. Therefore, we could see a pullback today, following yesterday’s price surge. Furthermore, we’re going to have to see actual prolonged supply disruptions to trigger huge moves to the upside.

Also keeping a lid on prices are rising U.S. shale production levels, lower demand due to the global economic slowdown and the lingering trade dispute between the U.S. and China.

Breaking News:  OPEC on Thursday forecast world demand for its crude will decline next year as rivals pump more, pointing to the return of a surplus despite an OPEC-led pact to restrain supplies. Let’s see if OPEC and its allies make additional cuts later in the year to match lower demand.

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