Oil Price Fundamental Daily Forecast – Supported by Aggressive Short-Covering, Speculative Buying

A sell-off in U.S. equity markets drove U.S. West Texas Intermediate crude oil and international-benchmark Brent crude oil lower on Monday. Concerns over the growing crude supply also weighed on prices after a report from Baker Hughes last Friday showed U.S. drillers added four oil rigs in the week to March 16. Losses may have been limited because of growing tensions between Saudi Arabia and Iran.

On Wednesday, May WTI crude oil settled at $62.13, down $0.28 or -0.45% and June Brent crude oil finished at $65.82, down $0.39 or -0.59%.

Forecast

U.S. West Texas Intermediate crude oil and international-benchmark Brent crude oil futures are trading higher shortly before the regular session opening. The gains are being fueled by a weak dollar, tensions in the Middle East and concerns of a further drop in Venezuelan output.

At 0939 GMT, May WTI crude oil is trading $62.72, up $0.59 or +0.95% and June Brent crude oil is at $66.24, up $0.42 or -0.64%.

The weaker U.S. Dollar tends to increase demand for dollar-denominated assets like crude oil.

Tensions between Saudi Arabia and Iran is also giving crude oil some support. Crown Prince Mohammed bin Salman is scheduled to meet with President Trump to discuss infrastructure projects, Russia’s role in Syria, the Saudi-led intervention in Yemen and the Iranian nuclear deal, a senior administration official said Monday.

According to CNBC, “the meeting between Salman and Trump comes as Riyadh and Washington forge improved relations following tensions resulting from the Obama administration’s handling of the Iran nuclear deal.”

“The discussions between the Saudi crown prince and Trump are expected to play a “critical role” in the president’s next steps regarding the 2015 nuclear agreement”, the senior administration official said.

After several weeks of consolidation, WTI crude oil is making a move to the upside. Since the market has been experiencing hedge fund liquidation lately, the move is likely being fueled by aggressive short-covering and some speculative buying tied to the tensions in the Middle East.

Long traders should enjoy the rally while it lasts because once the story goes away, the market is likely to settle into a sideways to lower range due to major concerns over rising U.S. production.

Traders will learn more about the U.S. crude oil supply late Tuesday when the American Petroleum Institute releases its weekly inventories report. It is expected to show a 5.0 million barrel build.