Oil Price Fundamental Daily Forecast – Speculators Betting Production-Cut Extension Will Lead to Tighter Supplies

U.S. West Texas Intermediate and international-benchmark Brent crude oil surged to new highs for the year on Tuesday. Traders said after a steady start to trading this week, the markets spiked to the upside on the news that OPEC on Monday canceled its planned meeting in April and this effectively meant they were extending the current supply production cuts into at least June, when the next meeting is scheduled.

At 11:47 GMT, May WTI crude oil is trading $59.76, up $0.38 or +0.62% and May Brent crude oil is at $68.07, up $0.53 or +0.78%.

There were no fresh supply/demand developments early Tuesday although one gets the sense that traders may be turning a little positive toward increased future demand as the United States and China move closer to reaching a trade deal that could bring an end to the year-long trade dispute between the two economic powerhouses.

The narrative remains the same:  the combination of the OPEC-led supply cuts with the U.S.-backed sanctions against Iran and Venezuela continue to underpin the crude oil markets. They should continue to work as long as OPEC and its allies continue to adhere to the plan to reduce output by 1.2 million barrels per day in an effort to trim the global supply and stabilize prices.

Recent data showed Saudi Arabia is actually cutting exports more than originally pledged. Furthermore, Russia recently said that it is rapidly approaching full-compliance with its end of the deal. In the meantime, bullish traders know the U.S. sanctions against Iran and Venezuela are not going to go away anytime soon.

Today’s price action also indicates that traders are ignoring the International Energy Agency warnings about a drop in demand if the global economic crisis continues. Today’s rally suggests that speculators are betting that a U.S.-China trade deal reached between now and the end of April will be sufficient enough to revive demand later this year.

Later today, investors will get the opportunity to react to the American Petroleum Institute weekly inventories report. This report could be a market moving event especially to the upside if the report shows an unexpected drawdown.

Brent crude is expected to strengthen if buyers can sustain a rally over $67.74. WTI crude can extend its gains on a sustained move over $59.63.