Oil Price Fundamental Weekly Forecast- Escalating Problems in Iraq’s Kurdistan Region Could Affect Supply

U.S. West Texas Intermediate and international-benchmark Brent crude oil closed higher last week with WTI crude oil outperforming Brent, continuing the divergence between the two futures contracts that began early last week.

November WTI crude oil settled the week at $51.67, up $1.01 or +1.99% and December Brent crude oil finished the week at $56.79, up $0.37 or +0.66%.

Both markets closed higher for the month and quarter. They were primarily supported by expectations of increased demand according to reports from OPEC and the International Energy Administration. Threats to the region’s oil supplies are now providing additional support as geopolitical instability in Iraqi Kurdistan underpin prices but profit-taking limited gains.

In other news, U.S. energy companies added oil rigs for the first week in seven. Drillers added six oil rigs in the week to September 29, bringing the total count up to 750, according to General Electric Co.’s Baker Hughes energy service firm.

Forecast

With the market underpinned by expectations of increased demand according to OPEC and the International Energy Administration, the rally should remain intact over the near-term although overbought conditions could lead to a short-term pullback.

The market may be a little overdone which could encourage hedge fund profit-taking, however, any moves into support areas will also be welcomed by the hedge fund crowd. It comes down to whether the professionals prefer to buy strength or sell weakness.

The weekly chart indicates the WTI futures contract could strengthen over $52.42 and weaken under $50.59. We’ll see a sideways trade if the market remains inside this range.

I don’t expect to see any surprises in the supply/demand data with the exception of increased U.S. production due to the increase in the rig count.

Nonetheless, I believe we’re still in a news driven market which means prices could spike to the upside if a crisis in Iraq’s Kurdistan region can’t be avoided. From a demand point of view, the market is positive. If the situation in the region escalates then the market is going to have supply issues and they should be positive for prices.