Oil Price Fundamental Daily Forecast – Pressured Early by Concerns Over Rising U.S. Production

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed in a lackluster trade early Monday. There has been no follow-though to the upside following Friday’s strong surge which suggests the move may have been triggered by aggressive short-covering rather than new buying.

At 0743, January WTI crude oil is trading $57.33, down $0.03 or -0.03% and February Brent crude oil is at $63.45, up $0.05 or +0.08%.

Oil prices opened lower in reaction to another rise in the U.S. rig count. This could lead to another increase in American production which could undermine efforts by the OPEC-led coalition to tighten supply and stabilize prices.

The amount of rigs drilling for new oil production in the U.S. rose by two last week to 751, the highest level since September, General Electric’s Baker Hughes energy services firm said on Friday.

Forecast

The direction of today’s trade hinges upon whether investors can overcome fears of increasing U.S. production which rose to 9.71 million barrels per day (bpd) in the U.S. Energy Information Administration’s latest report.

Last week, the trend turned down on the daily chart. That may have been a sign that buyers think crude oil is too expensive at current price levels and due for a correction into more favorable prices, or a value area.

For January WTI investors, the value zone is $55.07 to $54.13. For February Brent investors the value zone is $60.36 to $59.40.

Late last week, prices rose on rising Chinese crude demand and threats of a strike in Africa’s largest oil exporter. If these stores remain relevant then the market could be underpinned today. The strike is the wildcard.