Oil Price Fundamental Daily Forecast – WTI, Brent Respecting Technical Levels, Potential for Volatility with API Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil are trading lower on Tuesday while straddling the low end of key technical support levels. Gains continue to be limited by concerns over demand tied to a potential global economic slowdown. Rising U.S. production and stockpiles are also weighing on advances. Prices are being supported by the OPEC-led supply cuts and the U.S. sanctions against Iran and Venezuela.

At 10:01 GMT, July WTI crude oil is trading $52.65, down $0.60 or -1.13% and August Brent crude oil is at $60.55, down $0.73 or -1.19%.

Bearish Factors

Most of the selling pressure the last two weeks has been fueled by traders who switched from a bullish to a bearish outlook after the focus for traders shifted from tightening supply to increased risk of lower growth and demand. According to Ole Hansen, head of commodity strategy at Saxo Bank, “an escalation of the U.S.-China trade war has added further downside risks to already slowing economies.”

“Slowing economic activity now threatens to derail our base case of robust cyclical (oil) demand growth,” Bank of America Merrill Lynch said in a note.

In other news indicating a slowing economy in Asia, South Korea reported that its economy shrank by 0.4% in the first quarter while core inflation slowed to a near 20-year low in May.

As far as production is concerned, the U.S. continued its reign as top world producer in May by producing at a rate of 12.3 million barrels per day (bpd). Russia came in second with 11.11 million bpd and Saudi Arabia pumped 9.65 million bpd out of the ground.

Bullish Factors

There was a sliver of bullish news on Monday. Saudi Energy Minister Khalid al-Falih said that a consensus was emerging among producers to continue working “to sustain market stability” in the second half of the year.

Daily Forecast

Technical factors could determine the direction of the market on Tuesday. For WTI oil, the direction of the market is likely to be determined by trader reaction to $52.70. The key level to watch for Brent crude oil is $60.32.

Short-term, prices are likely to be influenced by today’s American Petroleum Institute’s weekly inventories report at 20:30 GMT and Wednesday’s U.S. Energy Information Administration report.

Longer-term, the U.S. is going to have to reduce production and OPEC and its allies are going to have to extend their program to cut output and also cut output. Of course, a resolution to the trade dispute between the U.S. and China will help alleviate demand concerns.