Advertisement
Advertisement

Oil Price Fundamental Daily Forecast – Signs of Tightening Supply, but Demand Remains May Concern

By:
James Hyerczyk
Published: Mar 4, 2019, 09:59 UTC

Traders are likely to continue to react bearishly to any news that suggests lower demand or a weakening U.S. or global economy. However, investors could turn bullish if the U.S. and China reach a trade deal in a timely manner.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Monday, recovering some of their steep losses from Friday. Traders are saying the markets are being underpinned by signs of tightening supply as well as optimism over a U.S.-China trade agreement. Volume is light and volatility below average despite reports that the two economic powerhouses may be closing in on a deal to end the year-long trade dispute that has slowed global economic growth.

At 09:31 GMT, April WTI crude oil is trading $56.25, up $0.46 or +0.81% and May Brent crude oil is at $65.68, up $0.61 or +0.94%.

Supply Tightens

A Reuters survey shows that supply from OPEC fell to a four-year low in February. According to the survey, top exporter Saudi Arabia and its allies over-delivered on the group’s pledge to cut 1.2 million barrels per day from production. In the meantime, Venezuelan output registered a further involuntary decline.

“OPEC exports are off by over 1.5 million barrels per day (bpd) since November,” Barclays bank said in a note released on Sunday.

“The supply picture looks generally tighter this year,” added energy analysts at Fitch Solutions, who also believe Brent could average $73.00 per barrel in 2019.

Adding in the impact of the U.S. sanctions against Iran and Venezuela shows a further reduction of around 2 million bpd in global crude supply.

U.S. Production Caps Gains

Despite the successful tightening of supply, traders are saying that rising U.S. production is helping to cap gains in the market. According to the latest Energy Information Administration’s report, oil production in the United States has risen to more than 12 million barrels per day.

However, skeptics point toward a possible slowdown in U.S. production, citing another drop in the number of oil rigs as one reason. According to Baker Hughes, U.S. energy firms last week cut the number of oil rigs looking for new reserves to the lowest in almost nine months.

Daily Forecast

Despite today’s early strength, concerns over a slowdown in the global economy remain the major issue putting a lid on prices. Last Friday’s more than 2 percent decline in reaction to weaker than expected U.S. ISM Manufacturing PMI data served as proof that investors are concerned about lower future demand.

Traders are likely to continue to react bearishly to any news that suggests lower demand or a weakening U.S. or global economy. However, investors could turn bullish if the U.S. and China reach a trade deal in a timely manner.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement