Oil Price Fundamental Daily Forecast – U.S. Rig Count Up for 17th Straight Week

Crude oil prices settled lower on Friday, but still managed to close higher for the week, breaking a three-week losing streak.

U.S. July West Texas Intermediate crude oil closed at $48.17, down $0.03 or -0.06% and internationally-favored August Brent crude oil settled at $51.05, unchanged for the session.

Despite the strong rally last week, most of the price action was short-covering, fueled by a surprise draw in U.S. inventories. Helping to put a lid on the market late last week and for several weeks are concerns that U.S. production was still rising and that this may diminish any hopes that OPEC’s plan to continue to cut output would have any major effect on the global supply glut.

On Friday, Baker Hughes reported that American drillers added oil rigs for the 17^th straight week in a row. The number of rigs drilling for new production jumped by 9 to a total of 712, versus 318 at this time last year.

OPEC and other producers meet on May 25 to decide whether to extend cuts. Saudi Arabia, OPEC’s de facto leader, has said it expects an extension to the end of 2017 or possibly beyond.

I expect to continue to see a choppy, two-sided trade until the May 25 meeting. The market will be driven this week by news stories about the OPEC meeting and hard-data reports from the American Petroleum Institute and U.S. Energy Information Administration.

Technical factors will also be important this week. If the upside momentum continues then WTI crude is likely to run into a wall of resistance and possibly a wave of new selling inside a major retracement zone at $49.29 to $50.51.

If there is no follow-through buying the look for investors to test $47.69. If this price fails as support then look for a break into $46.36 to $45.83.

If the market does break into the identified retracement zone area then look for the start of a sideways, rangebound trade.