Oil Price Fundamental Daily Forecast – Trend Changes to Up on Weekly Chart
U.S. West Texas Intermediate and international-benchmark crude oil continued to surge in reaction to the International Energy Agency (IEA) forecast on Wednesday that the market would continue to tighten as fuel demand increased.
November WTI crude oil settled at $50.35, up $0.60 or +1.21% and December Brent crude oil closed the session at $55.22, up $0.33 or +0.60%.
On Wednesday, the IEA raised its estimate of 2017 world oil demand growth to 1.6 million barrels per day (bpd) from 1.5 million bpd.
The IEA also said the global oil glut was shrinking thanks to strong European and U.S. demand, as well as production declines in OPEC and non-OPEC countries.
The good news on Thursday for the bulls was that November WTI crude oil crossed a swing top on the weekly chart at $50.62 for the first time this year. This is a major technical signal, however, it won’t mean much unless investors are willing to buy strength.
The main range for the year is $58.37 to $42.80. Its 50% to 61.8% zone is $50.59 to $52.42.
So while the market may have had the strength to change the trend to up on the weekly chart, buyers are still going to have to deal with the technical retracement zone.
In my opinion, the true determinant of strength in this market will be a sustained move over $52.42. Otherwise, all we have is a market testing the mid-point for the year at $50.59. This typically indicates a balanced market.
One catalyst that could drive prices higher and through resistance will be OPEC’s and Russia’s decision to extend the production cuts beyond March 2018.
Prices are a little lower early Friday, which could be a reaction to North Korea. Additionally, we may see a near-term pullback to give some of the hedge funds a chance to regroup for a stronger attempt at a breakout decisively to the upside.
I think the groundwork has been laid for higher prices, however, investors haven’t decided if they prefer to buy dips or buy strength.