Oil Price Fundamental Daily Forecast – WTI Clears $70 Level on Speculative Buying

U.S. West Texas Intermediate and international-benchmark Brent crude oil are trading higher early Monday as speculators continue to place long bets the U.S. will walk away from the nuclear deal with Iran. This is raising concerns over a possible disruption in crude oil supply from the Middle East.

At 0716 GMT, June WTI crude oil is trading $70.30, up $0.58 or +0.86% and July Brent crude oil is at $75.40, up $0.53 or +0.71%.

The deepening economic crisis in Venezuela is also threatening the OPEC members already low oil supplies.

In other news, hedge funds cut their net long U.S. crude futures and option positions in the week to May 1 by 11,825 contracts to 444,060, according to the U.S. Commodity Futures Trading Commission.

Additionally, U.S. energy companies added nine oil rigs looking for new production in the week to May 4, bringing the total count to 834, the highest level since March 2015, energy services firm Baker Hughes said last Friday.

Forecast

Prices are likely to be unpinned all week because the deadline for a decision on Iran is May 12. President Trump is putting some pressure on the Europeans to make some changes to the Iran nuclear deal to make it acceptable to the U.S. If they don’t come up with something viable then the U.S. will likely walk away from the deal. In the meantime, the EU is preparing for changes to their business deals with the country if the deal is negated and the sanctions are reimposed.

Speculation that the U.S. will renew the sanctions on Iran isn’t the only factor underpinning prices. Traders are also watching and reacting to the events in Venezuela that point toward a deepening economic crisis threatening the country’s production and exports.

Although there is room to the upside on the charts, the move won’t last if it’s being driven solely by buy stops rather than actual buying. Hedge funds cut their positions, oil rigs were added and U.S. production is rising. All of these factors could limit gains.

Traders already know what Iran and Venezuela produce so disruptions to supply from these two nations will be limited to what they produce. There will be no surprises. You can’t disrupt more than you produce. Therefore, I think there is more room to the downside than to the upside at current price levels.

We could see a buy the rumor, sell the fact situation later this week.