Oil Price Fundamental Daily Forecast – Weighed Down by Report of Increased Russian Output

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures contracts are trading lower early Monday, shortly before the regular session opening in New York. The narrative didn’t change much over the week-end. Investors are starting the week with concerns over rising U.S. production and worries that Russia will also step up its output.

At 0812 GMT, July WTI crude oil is trading $65.53, down $0.21 or -0.31% and August Brent crude oil is at $76.19, down $0.23 or -0.30%.

Last week’s story about Venezuela possibly stopping exports is still underpinning the markets, however, these gains are being capped by worries that surging U.S. output may start to offset this and OPEC’s efforts to withhold production in an effort to stabilize prices and reduce the global supply glut.

Prices are also being pressured by another rise in the number of rigs drilling for new oil production in the United States. According to Baker Hughes, the rig could rose by one during the week-ending June 8 to 862.

In other news over the week-end, Russian news agency Interfax reported on Saturday that Russia’s oil production, the world’s biggest, had risen to 11.1 million bpd in early June, up from slightly below 11 million bpd in most of May and well above its target production of under 11 million bpd as part of the OPEC-led deal.

Forecast

Straight-up, crude oil is likely to remain under pressure on Monday. Over the week-end, it was reported that the Russians raised production. Additionally, the new U.S. rig count implies that U.S. crude output, which is already at a record high of 10.8 million barrels per day (bpd), will also rise further.

Traders also continue to fell heat from last Friday’s quarterly report from JPMorgan which stated, “Non-OPEC supply is expected to rise sharply in 2019 led by U.S. shale growth along with Russia, Brazil, Canada and Kazakhstan.”

The report went on to further say, “oil fundamentals are expected to weaken in 2019 on the back of stronger than expected non-OPEC supply but also potential release of barrels from OPEC as the joint accord between OPEC and non-OPEC is unlikely to stay in place”.

The traditional fundamentals point toward lower prices. However, investors have to continue to leave some room for unexpected news due to the lingering geopolitical tensions over Iran and Venezuela. Based on last week’s price action, it is possible that we could be looking at a consolidating market ahead of the OPEC meeting on June 22.