Oil Price Fundamental Daily Forecast – Rangebound as Demand Concerns Outweigh Supply Cuts

U.S. West Texas Intermediate and International-benchmark Brent crude oil futures are trading mixed on Tuesday, shortly before the regular session opening. The markets are also trading inside Monday’s range, which suggests investor indecision and impending volatility. On the fundamental side, OPEC and oil producing allies approved a plan to reduce production and stabilize prices, however, this potentially bullish supply news was outweighed by negative thoughts on demand.

At 11:12 GMT, August WTI crude oil is at $59.05, down $0.04 or -0.07% and September Brent crude oil is at $65.08, up $0.02 or +0.02%.

OPEC Agrees to Supply Cuts

On Monday, OPEC agreed to extend oil supply cuts until March 2020. The program, which has been in place since January 1, 2019, has been largely responsible for underpinning crude oil prices for six months.

OPEC Allies Approve Deal to Restrict Output

On Tuesday, Russian Energy Minister Alexander Novak said non-OPEC producers had agreed to a nine-month rollover of supply cuts, according to multiple media reports.

US-China Trade Talk Restart

The decision to resume trade talk negotiations between the United States and China over the weekend had little effect on prices at the start of the week. The markets started higher, but prices faded throughout the session and are now trading nearly flat for the week.

Daily Forecast

Traders are showing a mixed to lower response on Tuesday because of renewed worries over demand. They actually never went away, but were overshadowed by a plethora of supply news the past week.

President Trump threw water on the idea of a fast resolution to the U.S.-China trade dispute when he tweeted that any trade deal with China would need to be “somewhat tilted” in favor of Washington. This raised concerns that the global economy is headed toward a recession that would lead to lower demand for crude oil.

We’re looking for the OPEC-led production cuts, the tensions in the Middle East between the U.S. and Iran, and the sanctions against Iran and Venezuela to continue to provide support. However, worries over demand and increasing U.S. stockpiles and production should continue to keep a lid on prices. This can only lead to generally rangebound trading.

Later today at 20:30 GMT, traders will get the opportunity to react the latest weekly inventories report from the American Petroleum Institute.