Oil Price Fundamental Daily Forecast – Fed Chair Powell’s Testimony Could Affect Dollar, Drive Price Action

U.S. West Texas Intermediate and international-benchmark Brent crude oil closed higher on Monday, but a little off their highest levels in three weeks.

April WTI crude oil futures settled at $63.91, up $0.36 or +0.57% and April Brent crude oil closed at $67.50, up $0.19 or +0.28%.

The markets were supported early in the session by comments from Saudi Arabia that it would continue to curb exports in line with the OPEC-led effort to trim global supplies.

Other factors underpinning prices were bullish comments from the Saudi oil minister, who said the country’s Q1 output should be below the production cap, a powerful quake in Papua New Guinea, which disrupted oil and gas operations, and a force majeure on Libya’s 70,000 bpd El Feel oilfield.

Forecast

Crude oil futures are trading lower early Tuesday, but inside yesterday’s range, suggesting investor indecision and impending volatility. The price action may also be indicating that investors are waiting for more news before continuing the current leg of the rally.

The catalysts behind the price action today could be Fed Chair Jerome Powell’s testimony before Congress. If he speaks with a hawkish tone then the U.S. Dollar could rally. This would likely put pressure on the dollar-denominated crude oil market.

Other catalysts include Tuesday’s American Petroleum Institute and Wednesday’s U.S. Energy Information Administration’s weekly inventories report. Both are expected to show a slight fall in U.S. production. However, inventories are forecast to have risen by 2.7 million barrels last week, a preliminary Reuters poll showed on Monday.

Additionally, gasoline stocks are seen down by 600,000 barrels, while distillate inventories, which include heating oil and diesel fuel, were seen down 700,000 barrels.

Looking at the bigger picture, prices are expected to continue to be underpinned over the longer-term as long as Saudi Arabia and other major producers continue to remain committed to reducing output in order to trim the global supply glut and stabilize prices.

It seems that only a stronger dollar, which could reduce demand and a surprise jump in U.S. production could derail the rally at this time, especially since recent data shows hedge funds returning to the long side of the market.