Oil Price Fundamental Daily Forecast – OPEC Claims Market Rebalancing; Calls on U.S. Shale Producers to Slow Output

James Hyerczyk

Updated Tue, Oct 10, 2017, 1:12 AM

U.S. West Texas Intermediate and international-benchmark Brent crude oil closed higher on Monday. WTI crude posted an inside move on the charts which suggests investor indecision and impending volatility. Brent crude rebounded from a fresh low to close higher, indicating that the buying may be greater than the selling at current price levels.

At 0653 GMT, December WTI crude oil is trading $49.98, up $0.05 or +0.10% and January Brent crude oil is at $55.58, up $0.04 or +0.07%.

Traders spent the day digesting the impact of Hurricane Nate which made landfall over the week-end. According to the U.S. Department of the Interior’s Bureau of Safety and Environmental Enforcement, short-term price support was coming from the United States, where 85 percent of U.S. Gulf of Mexico oil production, or 1.49 million barrels a day, was offline following Hurricane Nate.

Forecast

Early Tuesday, WTI and Brent crude oil are being underpinned by support from OPEC which said oil markets were rebalancing fast after years of oversupply.

“There is clear evidence that the market is rebalancing,” OPEC’s secretary general Mohammad Barkindo told Reuters on Monday.

“The process of global destocking continues, both onshore and offshore, with positive developments in recent months showing not only a quickening of the process but a massive drainage of oil tanks across all regions,” he said.

Some traders are also saying that previous “concerns that OPEC compliance would fade into the fourth quarter now appear unfounded”, and that “stronger than assumed economic growth offers the potential for tight market conditions to continue if OPEC extends the current deal for another nine months”.

Traders are also saying that prices could rise if the political dispute between the United States and Iran escalates.

In other news, OPEC is calling on U.S. shale oil producers to accept ‘shared responsibility’ of slashing global supply.

“We urge our friends, in the shale basins of North America to take this shared responsibility with all seriousness it deserves, as one of the key lessons learnt from the current unique supply-driven cycle,” OPEC General Secretary, Mohammed Barkindo said on Tuesday.

On the bearish side of the equation, North American shale drillers have helped production soar by nearly 10 percent in the U.S. this year. This is helping to limit the upside in crude oil. OPEC thinks it is causing unstable prices.

This article was originally posted on FX Empire