Oil Price Fundamental Daily Forecast – WTI Nearing Major 50% Level at $64.02

U.S. West Texas Intermediate and international-benchmark Brent crude oil rallied on Wednesday, posting their highest closing levels since December 2014 and closing within striking distance of prices last seen on November 28, 2014, the day after OPEC’s decision to cut production, trim the global supply and stabilize prices. The catalyst behind the surge was another weekly decline in crude oil supply.

On Wednesday, February WTI crude oil settled at $63.57, up $0.61 or +0.97% and March Brent closed at $69.20, up $0.38 or +0.55%.

Yesterday, U.S. government data showed another drawdown in crude inventories, but also an increase in fuel inventories and a falloff in refining activity.

According to the U.S. Energy Information Administration, U.S. crude inventories fell 4.9 million barrels last week, more than the 3.9-millioon decline forecast, but bigger-than-expected builds in gasoline and fuel stocks offset that drawdown.

The EIA report also showed a sharp decline in U.S. production last week that analysts blamed on the extreme cold temperatures that swept the nation.

Forecast

Crude oil prices are trading flat-to-lower early Thursday. At 0747 GMT, February WTI crude oil is trading $63.48, down 0.09 or -0.12% and March Brent crude oil is at $69.07, down $0.13 or -0.19%.

Aggressive hedge fund buying continued to provide the fuel for the rally. The EIA news wasn’t that bullish, but the momentum is likely to continue to the upside as long as the funds are willing to buy strength. In my opinion, the strong builds in product stocks offset the draw in crude oil, but since the “trend is your friend”, it doesn’t make sense to fight the funds until they stop buying and the markets start to reverse down.

According to the daily chart, the February WTI futures contract could run into resistance at $64.02. This is 50% of a major range and a logical spot to start booking profits. If there is a correction, it is not likely to be a trend-changing event, but likely designed to alleviate the nearly overbought conditions and to set up the next buy at more favorable prices.