Oil Price Fundamental Daily Forecast – Possible Limited Trade Due to U.S. Holiday
U.S. West Texas Intermediate and international benchmark Brent crude oil settle more than 2 percent higher on Monday, picking up where it left off last week. This marked the eighth straight day of higher closes, the longest streak in more than five years.
The catalysts behind the rally were a drop in U.S. production and a decline in the number of oil rigs. Some traders believe the news of rising OPEC production could cap gains.
Trading volume was low due a day before the U.S. Independence Day holiday on Tuesday. Volume could be even lower today due to an early close.
Forecast
Last week, the U.S. Energy Information Agency reported a 100,000 barrel per day drop in U.S. production. The market turned bullish on the news as it encouraged aggressive short-covering. Bearish traders, however, note that the drop in production was likely due to tropical storms and maintenance. They don’t believe the decline represents a start of the trend.
Traders will also be watching this Friday’s rig count report. Last week’s report showed the number of producing rigs drop by 2. This occurred shortly after the market had plunged to a multi-month low. Now that the market has recovered about 50% of the decline, the rig count may hold steady or even increase. If it drops again then look for prices to continue to firm.
In other bullish news, U.S. government data showed crude output fell in April for the first time this year. If reports for May and June show that supply is growing at a significantly more modest rate then this will also be supportive for prices.
On the bearish side, output from OPEC hit a 2017 high. June OPEC production rose 280,000 bpd to 32.72 million bpd, despite the cartel’s effort to limit production.
Momentum is currently driving the market. Technically, the August WTI futures contract is testing a key 50% level at $47.14. Trader reaction to this price is likely to set the tone of the market the rest of the week. The September Brent contract upside target is $49.78.
The market may continue to drift higher on Tuesday due to the limited trade, but the true reaction this week is going to come from the EIA report on Thursday. Due to the holiday, it has been delayed one day.
This article was originally posted on FX Empire