Oil Price Fundamental Daily Forecast – Traders Cautious as New Hurricane Threat Emerges

U.S. West Texas Intermediate and international-benchmark Brent Crude Oil rose sharply higher on Tuesday as more refineries and pipelines started moving crude oil and fuel-related products. Last week, Hurricane Harvey disrupted about 20 to 25 percent of U.S. refining capacity. As of Tuesday, Houston and the Port Arthur-Beaumont, Texas were still recovering.

October WTI crude oil settled at $48.66, up $1.29 or +2.72%. Internationally-favored November Brent crude oil closed at $53.38, up $1.04 or +1.99%.

According to reports, about 3 million barrels a day, or 16 percent of U.S. refining capacity, remained offline or in preliminary restart mode on Monday evening.

Meanwhile, another hurricane is developing in the South Atlantic that could have an impact on gasoline demand. Hurricane Irma may strike Florida over the week-end as a category 5 hurricane. This could lead to a drop in demand for both gasoline and crude oil in the area. At this time, there is still some uncertainty over which area of the country the hurricane will strike.

 Forecast

WTI Crude oil prices are currently testing a key technical area at $48.05 to $48.63. Trader reaction to this trading range will likely determine the near-term direction of the market. A sustained move over $48.63 will suggest the presence of buyers. A sustained move under $48.05 will indicate the return of sellers.

Although the market has recovered all of its Hurricane Harvey-related loss, there is still a little nervousness in the market due to the emergence of Hurricane Irma. It is expected to make landfall in south Florida and could have an impact on gasoline demand. This would then lead to a reduction in crude oil demand.

Traders are still going over the numbers since Florida is a driving state. However, some are arguing that the hurricane will have a limited effect on gasoline and crude demand since the U.S. driving season is over.

Later today, investors will have the opportunity to react to the latest figures from the American Petroleum Institute. On the Thursday, the U.S. Energy Information Administration will release its inventory numbers. It is expected to show a build due to the impact of Hurricane Harvey.

Given the uncertainty over the fundamentals, I think investors are going to rely more on technical analysis at this time. We’re likely to continue to see upside momentum if buyers can sustain the rally over $48.63. A break below this level will indicate that the buying is slowing. A move under $48.05 will signal the return of sellers.