Oil Price Fundamental Daily Forecast – Pressured by Firm Dollar, but Nearing Value Area

U.S. West Texas Intermediate and international-benchmark Brent crude oil fell more than 2 percent on Monday as a strengthening U.S. Dollar led to a drop in demand for the dollar-denominated commodity. Weak domestic demand data from China also weighed on prices. Losses were limited, however, on reports of potential reductions in crude oil supply from Libya.

October WTI Crude Oil settled at $47.73, down $1.24 or -2.53% and November Brent Crude Oil closed at $50.63, down $1.31 or -2.52%.

Trading turned volatile during the session after the National Bureau of Statistics (NBS) data showed Chinese refineries processed 10.71 million barrels per day (bpd) in July. This figure was down around 500,000 bpd from June and the lowest rate since September 2016.

In other news, Libya’s National Oil Corporation (NOC) said an investigation had been opened into recent security violations at Sharara oil field.

Forecast

Crude oil prices could be under pressure Tuesday according to the chart pattern, however, WTI and Brent are nearing areas that could be attractive to value-seekers. The key downside target for WTI crude is $47.46 to $47.26 and the key support target for Brent is $50.28 to $50.11. Barring any extremely bearish news, we could see a technical bounce on a test of these areas.

The drop in crude oil on Monday was steeper than expected, therefore, we may be due for a technical bounce. However, it did raise concerns that a glut of fuel products could weaken Chinese demand for oil.

The U.S. Dollar may be the wildcard today since crude oil is a dollar-denominated market. If buyers continue to drive the dollar higher, then this could limit the upside potential for crude oil, or drive it even further lower.

In other news, U.S. shale oil production is expected to grow for its ninth consecutive month in September to 6.15 million barrels per day, the U.S. Energy Information Administration said on Monday. This could be another factor limiting gains or pressing prices lower.