Oil Price Fundamental Daily Forecast – Sideways Until OPEC Gets It Together

U.S. West Texas Intermediate and international-benchmark Brent crude oil prices fell on Thursday, on concerns of lingering global oversupply as Russia considered a future output resumption and OPEC boosted its July production numbers.

The news caught long investors by surprise, causing an outside move and a potentially bearish technical closing price reversal top.

September WTI crude oil settled at $48.59, down $0.97 or -1.96% and October Brent crude oil closed at $51.90, down $0.80 or -1.52%.

According to Russian oil producer Gazprom Neft, it is “economically feasible” to resume production in mature fields after a global agreement among OPEC and non-OPEC expires, a representative of the company said.

In other news, OPEC said its oil output rose by 173,000 barrels per day (bpd) in July to 32.87 million bpd, led by the exempt producers plus top exporter Saudi Arabia, citing figures it collects from secondary sources.

Forecast

The downside momentum created by yesterday’s sell-off is triggering a follow-through move early Friday. At 0437 GMT, September WTI crude oil is down 0.91% and October Brent crude oil is off by 0.85%.

The early price action on Thursday gave the appearance that investors wanted to take the market higher. However, by the close it became clear that there are still some doubts over OPEC’s ability to stem production.

Inventories in the United States are at their lowest since October, having fallen for 10 of the last 12 weeks. However, that information is not enough to sustain a rally.

Additionally, investors are worried about global stocks. They remain above their longer-term averages and with the U.S. summer driving season nearly at an end, investors are well aware that the attempts by OPEC, Russia and other producers to boost prices may bring unwanted side-effects.

Thursday’s price action suggests to me that we are still looking at a rangebound trade. This will be the result of the tug of war between OPEC and U.S. producers. It seems when OPEC tries to raise prices by cutting production, U.S. producers almost immediately ramp up production. If this continues, prices are likely to move sideways until the end of the year.