Oil Price Fundamental Daily Forecast – Traders Still Looking for Value Area

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower for a 12^th consecutive session shortly before the regular session opening in New York. Yesterday, prices were higher for most of the session on the back of the news that Saudi Arabia was planning to cut exports by 500,000 barrels in December and speculation that OPEC and other non-OPEC producers were discussing ways to stabilize prices. However, this intraday short-covering rally came to a screeching halt after President Trump weighed in on the situation, telling OPEC not to cut supply.

At 1254 GMT, January WTI Crude Oil is trading $58.96, down $1.12 or -1.86% and January Brent Crude Oil is at $69.02, down $1.10 or -1.57%.

At the start of Tuesday’s session, both WTI and Brent are in bear markets, having fallen more than 20 percent from their 52 week highs. As recently as October 3, crude oil was pressing a four-year when the bottom began to fall out of the market.

Several factors are contributing to an oversupplied market including excessive production from the United States, Russia and Saudi Arabia, a forecast for lower demand growth, net short hedge funds and a stronger U.S. Dollar.

The U.S. is currently the biggest crude oil producer in the world with 11.6 million barrels per day in output, followed closely by Russia and Saudi Arabia. They account for one-third of global consumption.

On Tuesday, OPEC cut its forecast for oil demand growth in 2019 for the fourth consecutive month.

In October, hedge fund and money managers flipped their positions from net long to net short, first stopping the rally and then wiping out all of this year’s gains.

Finally, the strengthening U.S. Dollar is hurting emerging market currencies, leading to calls for lower demand. A rising dollar makes dollar-denominated crude too expensive for foreign buyers.

Forecast

Unless there is a major shift in the narrative, prices will continue to fall until traders find value. Technical factors could contribute to a turnaround because some indicators are showing a severely oversold market, but those indicators don’t really predict when the selling will stop and they tend to be coincidental indicators. The first bottoming signal under current circumstances will be a lower-low, higher close chart pattern.

News of softening of the tone between the U.S. and China over trade could encourage some profit-taking. The stronger the tone calling for a resolution of the conflict, the better the chances of a rebound rally. A sell-off in the dollar will also be beneficial for prices.

Later today, investors will get the opportunity to react to the latest supply data from the American Petroleum Institute.