Oil Price Fundamental Daily Forecast – Price Action Suggests Trade Deal May Not Be Enough to Extend Rally

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed on Monday despite the potentially bullish news over U.S.-China trade relations. U.S. crude is trading flat, while Brent is moving lower. Traders are saying an easing in tensions between the two economic powerhouses won’t stop a global slowdown that is already progressing. This would be bearish for crude oil demand.

At 09:12 GMT, April WTI crude oil futures are trading $57.20, down $0.05 or -0.09%. May Brent crude oil is at $67.18, down $0.07 or -0.10%.

Continuing to support crude oil prices are the OPEC-led production cuts and the U.S. sanctions against Venezuela and Iran.

Helping to limit gains are worries over rising U.S. production which recently reached 12 million barrels per day. However, some concerns may have been eased a little on Friday when energy services firm Baker Hughes reported that U.S. energy firms last week cut the number of oil rigs operating for the first time in three weeks.

Daily Forecast

Today’s muted response to positive news may be an early sign of a tired market. I’ve been saying for weeks that the objective for the OPEC-led production cuts is not to drive crude oil prices to $100 per barrel, but rather to find the balance point in the market. Today’s price action suggests, the markets may be at or near a balance point on the charts.

Furthermore, demand is the major issue, not supply. With U.S. supply surging, Goldman Sachs said it expected non-OPEC supply to grow by 1.9 million bpd this year, more than offsetting the OPEC cuts. That means much will depend on demand, which Goldman said it expected to grow by 1.4 million bpd this year.

The key upside target for WTI crude oil is $59.51 to $63.40. I expect to see sellers show up on a test of this zone. Brent’s target is $67.77 to $71.79.

Today’s price action also suggests that when the trade deal is finally reached, it may turn into a “buy the rumor, sell the fact” event. Additionally, others are saying that even with a trade deal, the global economy may not be able to avoid a recession late in the year or in early 2020.