U.S. West Texas Intermediate and international-benchmark Brent crude oil finished mixed on Monday with WTI closing marginally higher and Brent ending the session lower.
December WTI Crude Oil settled at $51.90, up $0.06 or +0.12% and January Brent Crude Oil closed at $57.27, down $0.31 or -0.54%.
At 0620 GMT, WTI is trading $51.92, up $0.02 or +0.04% and Brent is at $57.23, down $0.04 or -0.07%.
The markets were generally supported by a drop in the U.S. rig count and concerns over Middle East supply. Increased imports from India also contributed to the early strength. Prices fell late in the session after some analysts warned that the United States market may not be tightening by as much as expected.
Forecast
The price action early Tuesday is mixed for a second day. Bullish investors continue to react to declining exports from southern Iraq while bearish investors remain focused on U.S. production.
According to shipping reports, oil exports from southern Iraq have fallen by 110,000 barrels per day this month, adding to the drop in flows caused by a shortfall from the northern Kirkuk fields when Iraqi forces retook control from Kurdish fighters who had been there since 2014.
The drop in northern Iraqi shipments is helping to underpin the market but the decline isn’t big enough to launch a breakout over recent resistance.
Any further decline in exports is likely to trigger a spike to the upside, but like we saw last week, this move is not likely to lead to a longer-term rally. Any rapid rallies will likely be fueled by short-covering.
The next bullish move in crude oil is going to occur when the OPEC-led coalition decides to extend its program to cut production. This may not occur until late November. In the meantime, the market is likely to be underpinned, but gains are also likely to be limited.
Later today, investors will get the opportunity to react to the latest inventories data from the American Petroleum Institute. Its report is expected to show U.S. crude inventories likely fell by 2.5 million barrels last week, while gasoline and distillate stockpiles also probably fell by at least 1.5 million barrels.
Both WTI and Brent crude oil are in positions to breakout to the upside, however, this is not likely to occur unless oil exports from southern Iraq drop drastically. This is likely to occur if there is an escalation of the military activity in the region.
This article was originally posted on FX Empire