Oil Price Fundamental Daily Forecast – Trade Talk Hopes Fuel Intraday Rally; Hedge Funds Raise Bullish Bets

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Monday after reversing earlier weakness. The rebound in the markets was fueled by positive comments from President Trump, suggesting an easing of tensions between the United States and China. Last Friday, crude oil plunged in reaction to fresh tariffs from China and Trump’s ordering of U.S. companies to stop doing business in China.

At 10:00 GMT, October West Texas Intermediate crude oil futures are trading $54.57, up 0.40 or +0.73%. December Brent crude oil futures are at $58.36, up $0.20 or +0.34%.

President Trump said on Monday that China is ready to come back to the negotiating table and the two countries will start talking very seriously.

Speaking at the G-7 summit in Biarritz in France, Trump praised Chinese President Xi Jinping and welcomed his desire for a deal and for calm.

“China called last night our top trade people and said ‘let’s get back to the table’ so we will be getting back to the table and I think they want to do something. They have been hurt very badly but they understand this is the right thing to do and I have great respect for it. This is a very positive development for the world,” Trump said.

In other news, prices remain supported by the OPEC-led supply cuts and simmering tensions in the Middle East.

On Friday, a report from Baker Hughes showed that U.S. energy firms cut the most oil rigs in about four months the week-ending August 23, with the rig count falling to the lowest since January 2018, as producers cut spending on new drilling and completions.

Another factor supporting prices is fresh hedge fund and money manager buying. According to the U.S. Commodity Futures Trading Commission (CFTC), professionals raised their bullish wagers on U.S. crude to a three-month high in the latest week.

Daily Forecast

The initial reaction by crude oil traders to Trump’s comments were positive, but this early move is likely to dissipate throughout the sessions if China doesn’t confirm Trump’s comments. Trump has made comments like this before so I think investors will want to hear from China before continuing the intraday move.

Traders shouldn’t read too much into the comment either since the tariffs imposed by both sides on Friday remain intact. It is going to take a retraction of the new tariffs by both sides to really encourage the shorts to cover and for new buyers to re-emerge.

Gains could be capped today as the escalating trade war between the U.S. and China continues to undermine confidence in global economic growth.