Oil Price Fundamental Daily Forecast – Saudi Oil Minister Comment Shifts Focus Back to Supply

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Monday, following through to the upside following Friday’s strong late session rebound. The markets are being boosted by bullish comments from Saudi oil minister Khalid al-Falih that an end to OPEC-led supply cuts was unlikely before June and a report showing another dip in U.S. drilling activity.

At 08:53 GMT, May WTI crude oil is trading $56.98, up $0.55 or +0.97% and May Brent crude oil is at $66.35, up $0.61 or +0.93%.

Crude oil has been supported for nearly three months by OPEC and its allies pledge to cut 1.2 million barrels per day (bpd) in crude supply. However, these production cuts were scheduled to end in June. Overnight, the Saudi oil minister suggested that these cuts in output are likely to continue beyond the original deadline.

Saudi oil minister Khalid al-Falih told Reuters on Sunday it would be too early to change the OPEC-led policy at the group’s meeting in April. The cartel is scheduled to meet in Vienna on April 17-18, with another meeting scheduled for June 25-26, to discuss supply policy.

“We will see what happens by April, if there is any unforeseen disruption somewhere else, but barring this I think we will just be kicking the can forward,” Falih said.

Additional price support was provided by a report from U.S. energy services firm Baker Hughes which showed in its weekly report that the number of rigs drilling for new oil production in the United States fell by nine to 834.

“This is the third straight week of decline…after a number of oil producers trimmed their spending outlooks for 2019,” ANZ bank said on Monday.

Daily Forecast

Today’s price action suggests that WTI and Brent are rangebound, getting just enough support from OPEC to sustain the upside bias, and just enough production from the U.S. to put a cap on gains.

Prices could take out recent highs if OPEC decides to extend the program to trim supply or increase the production cuts. Additional rig cuts by the U.S. will also be supported. However, until a trade deal between the U.S. and China is reached, crude oil prices are likely to remain rangebound.

Also capping gains are concerns over the global economic slowdown and its effect on demand. However, today’s rally is about supply with traders expressing little concern over a slowdown in China, or Friday’s mixed U.S. jobs report.