Oil Price Fundamental Daily Forecast – Underpinned by Tight Supplies at Cushing Futures Delivery Hub

U.S. West Texas and international-benchmark Brent crude oil futures are trading slightly better early Monday with supply concerns continuing to underpin prices. While most of the focus has been on international events lately, today’s focus appears to be on worries over a shortage in domestic supply.

At 0531 GMT, August WTI crude oil is trading $74.13, up $0.33 or 0.45% and September Brent crude oil is at $77.39, up $0.28 or +0.36%.

According to the latest reports, inventories at Cushing, the futures delivery hub for U.S. crude futures, fell to their lowest level in 3-1/2 years. This situation has forced some futures contracts into backwardation. This occurs when tight supplies and strong demand drive nearby crude oil prices higher than deferred futures contract. By some reports, some futures contracts are backwardated by as much as $2.00 a barrel.

In other news, according to General Electric Co.’s Baker Hughes energy services firm, the U.S. rig count rose by five during the week-ending July 6. That brings the total count to 863, up 100 from last year.

Forecast

Although prices are trading slightly better early Monday, the trading range is narrow because while the bulls are reacting to the tight supply situation at Cushing, the bears are waiting for information on potential increases in Gulf exports. Until they get the new export numbers, buyers and sellers may be reluctant to take on too much risk at this time.

OPEC and other major producers recently agreed to a modest increase in output to dampen the rally in oil prices, which are hovering near a 3-1/2 year high. The increase in supply will reduce some of the output cuts that the OPEC-led group implemented in January 2017. Traders aren’t yet sure of the exact amount of the increase in output so fresh export numbers will offer some insight. This should also provide direction for prices.

Traders are also watching the trade dispute between the United States and China. Although concerns that oil prices will be weighed down by a trade conflict between the two economic powerhouses, have dissipated to some extent, there is still the possibility that China will impose a tariff on U.S. crude imports.

Without any fresh news, WTI is likely to sit inside last week’s range at $75.27 to $72.14 today and Brent inside $79.55 to $77.11.