Oil Price Fundamental Daily Forecast – Traders Fail to Respond to Renewed Middle East Tensions

U.S. West Texas Intermediate and international-Benchmark Brent crude oil futures are trading nearly flat on Monday shortly before the cash market opening. The lack of fresh supply/demand news and the light holiday volume is apparently keeping the major players on the sidelines. Additionally, traders showed little response to renewed Middle East tensions.

At 10:16 GMT, February WTI crude oil is trading $61.71, down $0.01 or -0.00%. March Brent crude oil is at $66.90, up $0.03 or +0.04%.

Despite today’s subdued price action, that may continue until after traders come back in full force after the New Year’s holiday, the market has been bullish in December.

The market received its initial boost early in the month when OPEC and its allies agreed to deepen production cuts by another 500,000 barrels per day until March.

The markets have gone on a bullish tear since December 13 when the U.S. and China announced a “Phase One” agreement that reduces some U.S. tariffs in exchange for what U.S. officials said would be a big jump in Chinese purchases of American farm products and other goods.

Oil prices have also been boosted by declining U.S. crude oil stocks. Last week, the U.S. Energy Information Administration (EIA) reported a drop in crude stocks by 5.5 million barrels in the week to December 20, far exceeding a 1.7-million-barrel drop forecast in a Reuters poll.

Daily Forecast

There isn’t much on the data docket to move prices today. Furthermore, if a U.S. air strike in the Middle East couldn’t move prices, I doubt a Chicago PMI report will.

On Sunday, the United States carried out air strikes in Iraq and Syria against the Kataib Hezbollah militia group, while protesters in Iraq on Saturday forced the closure of its southern Nassiriya oilfield.

CNBC reported that U.S. officials said the air strikes in response to the killing of a U.S. civilian contractor in a rocket attack on Iraqi military base was successful, but warned that “additional actions” may still be taken.

Additionally, Iraq’s oil ministry said the production halt at the Nassiriya oilfield will not affect the country’s exports as it will use additional output from southern oilfields in Basra.