Oil Price Fundamental Daily Forecast – Upside Momentum Slowing as U.S. Production Reaches 12 Million Bpd

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading slightly lower on Friday shortly before the regular session opening. Trading has been lackluster with bullish traders hoping for fresh news about the U.S.-China trade negotiations. In the meantime, the OPEC-led supply cuts continue to underpin prices. Gains continue to be capped by worries over rising U.S. production.

At 12:48 GMT, April WTI crude oil is trading $56.84, down $0.12 or -0.21% and April Brent crude oil is at $66.90, down $0.17 or -0.25%. Both markets are still hovering near multi-month highs reached earlier in the week.

Bullish Fundamentals

OPEC and its allies including Russia continue to adhere to their plan to cut production by 1.2 million barrels per day (bpd) in an effort to trim the excess global inventory. On Thursday, Goldman Sachs said in a note that it expects OPEC output to average 31.1 million bpd in 2019, down from 31.9.

Bearish Fundamentals

According to the U.S. Energy Information Administration (EIA), U.S. crude oil production reached 12 million barrels per day (bpd) for the first time last week.

Rising production is also leading to a larger inventory build. According to the EIA, U.S. commercial crude oil inventories rose by 3.7 million barrels to 454.5 million barrels in the week-ending February 15.

After the EIA report on Thursday, analysts at Citi said, “We see total U.S. crude production hitting 13 million bpd by year-end, with 2019 averaging 12.5 million bpd. Citi further added, “We could be seeing some weeks with 4.6 million bpd of gross crude exports by end-year, adding to this week’s new record” of 3.6 million bpd.

Daily Forecast

With supply and demand nearing a balance point, there may not be that much more upside potential in the markets. Goldman Sachs said on Thursday that surging U.S. supply likely means that expected non-OPEC supply will grow by 1.9 million bpd this year, more than offsetting the OPEC cuts.

That means much will depend on demand, which Goldman said it expected to grow by 1.4 million bpd this year.

Given the supply and demand picture, Goldman said “we expect $60-$65 per barrel Brent prices, on average, in 2019 and 2020.

The current technical chart pattern suggests the buying for April Brent may slow when prices reach $67.77 to $71.79. The key upside target for April WTI is $59.51 to $63.40. This could prove to be resistance.