Oil Price Fundamental Daily Forecast – Traders Seeking Balance Point on Charts

U.S. West Texas Intermediate and international-benchmark crude oil futures are trading mixed early Thursday. The price action is being influenced by concerns over emerging markets and a possible announcement of additional tariffs from the U.S. on another $200 billion of Chinese goods.

At 0823 GMT, October WTI crude oil is trading $68.64, down $0.08 or -0.12%. December Brent crude oil is at $76.92, up $0.02 or +0.03%.

Despite the early weakness, looming U.S. sanctions against Iran, may be preventing prices from accelerating to the downside.

The emerging market weakness is fueling talk of lower demand in the future. This, along with weaker demand from China and the prospects of increased supplies from OPEC and other non-OPEC producers is weighing on prices.

Essentially, it is the stronger U.S. Dollar that is putting the pressure on the emerging market currencies. Crude oil is a dollar-denominated commodity so when the dollar rises, foreign demand for crude oil tends to drop.

In other news, the American Petroleum Institute (API) reported a draw of 1.17 million barrels of United States crude oil inventories for the week-ending September 1, compared to analyst expectations that this week would see a draw in crude oil inventories of 1.29 million barrels. Some analysts had anticipated a 2.9 million barrel draw.

The API also reported a build in gasoline inventories for the week-ending September 1 in the amount of 1 million barrels. Analysts predicted a draw of 81,000 barrels.

Distillate inventories were also up last week, rising by 1.8 million barrels, compared to an expected build of 742,000 barrels. Inventories at the Cushing, Oklahoma futures hub increased the week-ending August 31 by 613,000 barrels.

Forecast

The price action suggests that traders are using the supply and demand data to find a balance point in the markets.

For the October WTI futures contract, the balance area is $67.65 to $66.76. With the main trend up, buyers are likely to step in on a test of this area. The balance area for the December Brent futures contract is $75.11 to $74.10.

Later today at 1500 GMT, the U.S. Energy Information Administration’s weekly inventories report is expected to show a 2.2 million barrel draw down. Look for prices to fall further if this report misses the forecast on the low side.