Oil Price Fundamental Daily Forecast – Posts Biggest Gain in Six Weeks on Saudi Arabian Geopolitical Tensions

U.S. West Texas Intermediate and international Brent crude oil futures soared to their highest levels since mid-2015 on Monday as a major political crisis in Saudi Arabia triggered an acceleration to the upside due to concerns over geopolitical risk.

December WTI crude oil settled at $57.35, up $1.71 or +3.07% and January Brent crude oil finished at $64.27, up $2.20 or +3.54%.

According to Reuters, crude oil futures spiked higher early in the session in reaction to the Saudi Crown Prince Mohammed bin Salman’s coordinated arrests of several princes and ministers, as part of a crackdown on corruption.

The firing of a rocket from Yemen toward the Saudi capital of Riyadh this weekend also contributed to the geopolitical tensions in the market. Saudi Arabia is waging a war against Iran-supported rebels in Yemen.

Forecast

Crude oil futures are trading mixed early Tuesday, with WTI posted a slight gain and Brent edging lower. The early moves are likely related to profit-taking and position-squaring after Monday’s biggest gain in six weeks. Some traders are also saying the reaction to the Saudi Arabian crown prince’s attempt to tighten his grip on power and rising tensions between the kingdom and Iran may have been overdone.

Monday’s price action indicates that speculators may have priced in the possibility that a potential conflict between Saudi Arabia and Iran could limit significant supply out of the region. Some are saying that WTI crude may move above $60 and Brent crude may move above $70 over the near-term if the situation escalates.

In addition to the speculative events involving Saudi Arabia, bullish traders remain focused on the strong possibility that the OPEC-led coalition will extend their current production cuts beyond the March 2018 deadline when it meets in Vienna, Austria on November 30.

Although buyers are concerned about increasing U.S. production, last week, U.S. drillers cut eight oil rigs last week. This was seen as supportive for prices.

Late Tuesday, traders will get the opportunity to respond to the latest weekly supply and demand data from the American Petroleum Institute. Its report is expected to show a 2.8 million barrel drop in crude, a 2.176 million barrel draw in gasoline inventories and a 2.1 million barrel decline in distillates.