Oil Price Fundamental Daily Forecast – Rig Count Likely to Rise Along With Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil finished lower on Thursday, driven by profit-taking, a rising U.S. Dollar and higher interest rates.

June WTI crude oil settled at $68.33, down $0.14 or -0.20% and June Brent crude oil closed at $73.78, up $0.30 or +0.41%.

Early in the session, crude oil extended its gains from the previous session, which came after the U.S. Energy Information Administration reported U.S. crude stockpiles fell by 1.1 million barrels last week.

Despite the potentially bearish technical closing price reversal chart pattern, the market is likely to continue to be underpinned by the reimposition of sanctions on Iraq and the deteriorating situation in OPEC-member Venezuela. Both situations should lead to supply disruptions.

Additionally, the gap between supply and demand in the oil market has tightened as OPEC, Russia and other producers have nearly achieved their aim of shrinking global crude stockpiles to the five-year average.

Forecast

Crude oil futures are trading lower early Friday, but remain near their highest levels since late 2014. The price action suggests the market is overbought, but still underpinned by a series of bullish scenarios. The issue at this time is whether hedge funds will be willing to buy strength at current price levels, or play for a short-term correction into support.

At 0628 GMT, June WTI crude oil is trading $68.20, down $0.13 or -0.19% and June Brent crude oil is at $73.68, down $0.10 or -0.14%.

The fundamentals are mostly bullish at this time. Ongoing OPEC-led supply cuts are proving the longer-term support. This is leading to tightness in the crude oil market that could spread to products like gasoline and distillates. Speculative support is coming from the possible reimposition of sanctions against Iran that should lead to a cut in supply. Venezuela is experiencing huge problems that could also lead to diminished supply.

One factor that could limit gains is rising U.S. production, which has jumped by a quarter since Mid-2016 to 10.54 million barrels per day.

Overbought conditions could put pressure on the market today, but the closing price is likely to be determined by the rig count. Rising crude prices could encourage U.S. producers to open additional wells as they try to take advantage of the current situation in order to boost their bottom line.

We’re bullish longer-term, but won’t be surprised by a short-term correction.