Oil Price Fundamental Daily Forecast – Prices Retreat Despite Bullish OPEC Outlook

U.S. West Texas Intermediate and international-benchmark Brent crude oil settled nearly unchanged on Monday despite a bullish report from OPEC.

January WTI crude oil settled at $56.97, down $0.01 or -0.02% and February Brent crude oil finished the session at $63.10, down $0.31 or -0.49%.

The oil cartel raised its forecast on Monday for demand for its oil in 2018 and said its deal with other producers to cut production was trimming excess oil in storage, potentially pushing the global market into a larger deficit next year.

OPEC also said it now expects oil demand to rise by 1.51 billion bpd next year, up 130,000 bpd from previously, to 98.45 bpd.

Another forecast showed a lower estimate of supply growth from non-OPEC countries next year. OPEC now sees a rise of 870,000 bpd, down 70,000 bpd from the previous forecast.

Forecast

OPEC made bullish statements and the crude oil markets went down. This may be telling us that investors have already priced this news into market. With hedge funds holding record long positions, it may also be telling us that the market is overbought.

If this is the case then investors are more likely to favor buying a pullback into support than buying strength at current levels.

Last Wednesday’s technically bearish closing price reversal top on the WTI and Brent daily charts were confirmed on Monday. This is another sign that the selling may be greater than the buying at current price levels. The chart pattern doesn’t mean the trend is changing to down, but it could start a 2 to 3 day correction equal to about 50% to 61.8% of the last rally.

If the selling pressure increases then the January WTI crude oil contract could plunge into $54.62 to $53.78. The target for the February Brent futures contract is $60.36 to $59.40.

Later on Tuesday, investors will get their first taste of U.S. crude oil inventories before Wednesday’s official EIA report with the release of the weekly report from the American Petroleum Institute.