Oil Price Fundamental Daily Forecast – Thin Volume Could Lead to Two-Sided Trade

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Tuesday after giving back early session gains. Both markets rallied shortly after the opening and the extended holiday week-end.  The catalysts behind the early strength are expectations for healthy demand and the ongoing production cuts led by OPEC and Russia. Gains may have been limited by concerns over rising U.S. production and low volume.

At 1137 GMT, February WTI crude oil futures are trading $58.39, down $0.08 or -0.15% and March Brent crude oil futures are at $64.57, down $0.16 or -0.25%.

Although both WTI and Brent crude oil are trading near 2015 highs, Brent futures attracted sellers as it neared its December 12 main top at $64.92. WTI crude oil traded through its February 12 top at $58.60, but sellers prevented the market from continuing the rally into additional tops at $58.90 and $58.99.

The early session rally may have been fueled by positive comments from Jabar al-Luaibi, oil minister of OPEC-member Iraq. He said on Monday there would be a balance between supply and demand by the first quarter of 2018.

“During the first quarter of next year there will be more balance between supply and demand, which will reflect positively on improving global oil prices,” he said.

In other news, the U.S. rig count, held at 747 in the week to December 22, according to the latest weekly report by Baker Hughes.

Forecast

Thin-holiday trading conditions could lead to a choppy, two-sided trade today. The low volume could, at times, lead to exaggerated volatility.

Stripping aside the below average volume, the main focus for bullish traders will continue to be the OPEC production cuts and healthy global demand. According to many analysts, demand could hit 100 million barrels per day (bpd) for the first time at some point next year or in 2019.

Limiting the upside are worries that U.S. production will soon catch up to that of Saudi Arabia and Russia due to aggressive shale drillers.

Furthermore, traders are also worried that the expected return of the Forties pipeline system in the North Sea, will put about 450,000 bpd of crude back into the market.