Oil Price Fundamental Daily Forecast – Two-sided News Driving Similar Price Action

U.S. West Texas Intermediate and international-benchmark Brent crude futures are trading mixed early Tuesday as traders continue to position themselves in response to a possible hit on supply due to the looming Iran sanctions, and worries that the on-going trade dispute between the U.S. and China will eventually be a drag on demand

At 0742 GMT, October WTI crude oil is trading $68.75, down $0.12 or -0.19% and November Brent is at $76.23, up $0.02 or +0.03%.

Once again, two-sided news is driving the price action. Supporting prices are supply risks from producers such as Venezuela, Africa and Iran. Capping the market is gradually rising output from OPEC and other major non-OPEC producers.

On the supply side, the International Energy Agency (IEA) on Monday warned of further supply disruptions, especially from Venezuela, where an economic crisis has cut deep into the OPEC-member’s oil output.

Venezuelan crude oil exports had halved in the previous two years to just 1 million bpd by mid-2018, according to trade data flow.

“We can expect a further fall,” the IEA’s Executive Director Fatih Birol told Reuters in Norway on Monday.

Birol also offered a bleak assessment of OPEC-members Libya and Nigeria, which he described as ….”fragile countries”.

In other news, the monitoring committee of OPEC found that oil producers participating in a supply-reduction agreement, which includes non-OPEC member Russia, cut output in July by 9 percent more than called for.

The findings for last month compare with a compliance level of 120 percent for June and 147 percent for May, meaning participants have been steadily increasing production.

Forecast

Barring any surprise news, the markets are expected to remain somewhat range-bound, hemmed in by conflicting price signals. Traders are being captivated by uncertainty over Iran.

The IEA said on Monday that it’s too early to gauge the impact of the U.S. sanctions that will target Iran from November. Traders are also showing concerns about an economic slowdown because of the trade conflict between the United States and China, which could weigh on demand.

As for WTI crude, holding above $68.46 to $67.59 is helping to give the market a slight upside bias. Falling into this zone will create a stagnant trade.

The key zone for Brent is $75.29 to $76.22. Early Tuesday, the market is working slightly higher than neutral, indicating an upside bias.