Oil Price Fundamental Daily Forecast – Speculators Betting on Escalation of Tensions in Middle East

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Monday on concerns that Iran’s seizure of a British tanker last week may lead to supply disruptions in the Middle East. So far the rally has been tentative with the move being fueled by a mixture of short-covering and speculative buying.

At 09:56 GMT, September WTI crude oil is trading $56.80, up $1.04 or +1.88% and September Brent crude oil is at $63.85, up $1.38 or +2.15%.

Traders are essentially attempting to rebuild the geopolitical risk premium that was crushed last week when Iran agreed to talk with the United States about its nuclear program.

Bullish Developments

Tensions surrounding Iran are high early Monday after Iran’s Revolutionary Guards said on Friday they had captured a British-flagged oil tanker in the Gulf in response to Britain’s seizure of an Iranian tanker earlier this month.

According to CNBC, Britain was weighing its limited options on Monday as a recording emerged showing the Iranian military defied a British warship when it boarded and seized the ship.

Bearish Developments

CNBC also reported that Libya’s Sharara oilfield, the country’s biggest, had resumed production at half capacity on Monday after being shut since Friday, which caused an output loss of about 290,000 barrels per day (bpd).

Goldman Sachs on Sunday lowered its forecast of growth in oil demand for 2019 to 1.275 million bpd, citing disappointing global economic activity.

Other News

According to data from the U.S. Commodity Futures Trading Commission and the Intercontinental Exchange, hedge funds and other money managers raised their combined futures and options positions on U.S. crude for a second week and increased their positions in Brent crude as well.

Daily Forecast

Speculative money is flowing into the crude oil markets on Monday in reaction to escalating tensions between the UK and Iran. Falling supply in the region could help underpin prices, but it is going to take a long-term supply disruption to trigger a lengthy rally. About one-fifth of the world’s oil supplies flow through the Strait of Hormuz, which is the area of interest in the Gulf.