Oil Price Fundamental Daily Forecast – WTI Needs Rig Decline to Sustain Rally Over $48.52

U.S West Texas Intermediate and international-benchmark Brent crude oil futures reached an 8-week high on Thursday, closing higher for a fourth straight session. Support continued to be provided by last week’s huge inventory draw down as reported in Tuesday’s American Petroleum Institute’s report and Wednesday’s U.S. Energy Information Administration’s inventories report. Buyers also like Saudi Arabia’s plan to cut exports.

September WTI crude oil settled at $49.04, up $0.29 or +0.59% and October Brent crude oil finished the session at $51.49, up $0.39 or +0.76%.

In other news, U.S. shale producers including Hess Corp., Anadarko Petroleum and Whiting Petroleum this week announced plans to cut spending this year as a result of low oil prices.

Forecast

After a slew for new information hit the energy markets earlier in the week, traders may welcome Friday’s light news session.

The key report will be the Baker Hughes rig count. Bullish traders will be looking for further signs of slowing shale drilling. The market will also be sensitive to headlines from Venezuela with the U.S. Congress’ D-day for sanctions approaching on July 30.

While most investors were watching the EIA report on Wednesday, the Trump administration imposed sanctions on 13 senior Venezuelan officials and others close to President Maduro’s regime. Some called the sanctions relatively modest, but American officials stressed that it was merely a first shot in reigning in the regime.

This is important to the oil market because the two countries’ economies are tightly intertwined through the oil that Venezuela sells to the United States. According to the latest data, it accounts for roughly 10 percent of the oil America imports. Also Washington has powerful tools at its disposal, including a complete prohibition on Venezuelan oil.

Additionally, skeptics are saying, however, that the upside may be limited because the recent surge in prices may actually encourage more output, particularly from U.S. shale producers with low costs.

I’m going to stick with the following forecast. September WTI crude will be bullish over $48.52, neutral between $48.52 and $47.33, and bearish under $47.33.