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Oil Price Fundamental Daily Forecast – Struggling at Last Week’s Close with COVID Concerns Still Lingering

By:
James Hyerczyk
Published: Jul 23, 2021, 12:44 UTC

The markets may have recovered this week’s earlier losses, but they’ve only retraced about 62% of the break from the July 6 top to the July 20 bottom.

WTI and Brent Crude Oil

In this article:

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading flat on Friday while on track to end the week little changed after a surprising recovery from Monday’s slide underpinned by expectations that supply will remain tight as demand recovers.

The price of oil and other riskier assets tumbled at the start of the week on concern over the impact on the economy and crude demand from surging cases of the COVID-19 Delta variant in the United States, Britain, Japan and elsewhere.

At 12:17 GMT, September WTI crude oil is trading $71.75, down $0.16 or -0.22%. September Brent crude oil is at $73.60, down $0.19 or -0.26%.

WTI and Brent crude oil plunged over 7% on Monday but have recouped all of those losses, with investors expecting demand to stay strong and the market to receive support from falling oil stockpiles and rising vaccination rates.

Demand growth is expected to outpace supply after Sunday’s deal between the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, to add back 400,000 barrels per day (bpd) each month from August.

ANZ Research analysts said in a report that the market was starting to sense the 400,000 bpd increase will not be enough to keep the market balanced and inventories in the United States and across OECD countries would continue to fall.

Meanwhile, U.S. crude inventories rose by 2.1 million barrels last week, but stocks at the Cushing, Oklahoma delivery point for U.S. crude hit their lowest since January 2020.

Daily Forecast

The markets may have recovered this week’s earlier losses, but they’ve only retraced about 62% of the break from the July 6 top to the July 20 bottom.

Those traders who bought crude oil on July 20 when it was trading in a value zone have an advantage. Those that start buying now are getting in at nearly the same price the market was trading at last Friday.

The first buyers bought cheap oil, the second buyers are dealing with the same COVID concerns and increasing supply come August that were present last week. Unless investors are willing to buy strength in the face of unknown demand destruction, we’re likely to see a rangebound trade until the demand destruction issue worsens or plays out.

For a look at all of today’s economic events, check out our economic calendar.

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.

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