Oil Price Fundamental Daily Forecast – U.S. Energy Companies Cut Oil Rigs Last Week

U.S. West Texas Intermediate and international benchmark Brent crude oil closed higher on Thursday, supported by a strong rally in U.S. equities markets and as investors weighed a rise in U.S. crude inventories and production against the OPEC-led plan to cut output.

May WTI crude oil futures settled at $64.94, up $0.56 or +0.87%. June Brent crude oil futures finished the session at $69.34, up $0.58 or +0.84%.

In other news, U.S. energy companies this week cut oil rigs for the first time in three weeks. Drillers cut six oil rigs in the week to March 29, bringing the total count down to 798, General Electric Co.’s Baker Hughes energy services firm said in its closely followed report on Thursday.

Earlier in the week, the U.S. Energy Information Administration (EIA) said commercial U.S. stocks rose by 1.6 million barrels in the last week to 429.95 million barrels, while output hit a record 10.43 million bpd.

Forecast

Investors are going to have to determine which news is relevant at this time. Speculators may be buying in anticipation of a possible extension of the OPEC-led deal to cut production, but nothing is likely to be determined until the cartel’s meeting in November.

There is a meeting in June, but I don’t expect a final decision at that time.

On the other hand, U.S. production is definitely going up and the trend is likely to continue. Therefore, I have to conclude the market is going to have trouble sustaining a rally. We’re likely to continue rangebound with a slight upside bias. The direction of the U.S. Dollar could make the difference over the near-term. A stronger dollar is likely to limit gains in crude oil. A weaker dollar should underpin the market or at least prevent prices from collapsing.