Oil Price Fundamental Daily Forecast- EIA Gasoline Number Will Set the Tone
U.S. West Texas Intermediate and international-benchmark Brent crude oil finished lower on Tuesday as investors continued to take profits after last quarter’s stellar gains. Much of the rally last quarter was news driven with aggressive hedge fund buying generating the upside momentum.
November WTI crude oil settled at $50.42, down $0.16 or -0.32% and December Brent crude oil finished the session at $56.00, down $0.12 or -0.21%.
The main catalyst behind the rally was expectations of increased demand according to reports from OPEC and the International Energy Administration. However, since that initial rally, bullish investors have been waiting for fresh news. In the meantime, the wall of worry about the supply glut has been encouraging investors to take profits and pair positions.
New data from the Commodity Futures Trading Commission shows that money managers have pushed their bullish bets on the Brent crude market to a record high in the last week, encouraged by signs of rebalancing between supply and demand. However, this move may have sent the Brent contract into overbought territory since the futures contract posted a dramatic closing price reversal top on the daily chart on September 26.
Forecast
November WTI crude oil continues to test the key technical retracement zone at $50.23 to $49.60. The key zone for December Brent crude oil is $55.88 to $55.17. Holding these areas will mean buyers are still coming in to support the uptrends. A failure to establish a new support base will indicate there is something wrong with the market.
Bullish traders like the idea of increased demand. Additionally, on Tuesday, OPEC Secretary-General Mohammad Barkindo said that compliance with the oil output cut deal between OPEC and non-OPEC nations is extremely high. Turkey is even threatening to close a pipeline that brings oil from the region in northern Iraq to the Mediterranean.
Bearish traders are worried that the price rise will encourage U.S. shale producers into more drilling and push prices lower again. Last week, the oil rig count rose so perhaps we’ll see increased U.S. production in this week’s U.S. Energy Information Administration’s weekly inventories report.
This may be the reason why bullish traders have been a little shy this week. Traders are looking for the EIA report to show a draw of about 500,000 million barrels. An unexpected build will be bearish for prices.
In other news, the American Petroleum Institute (API) reported a draw of 4.079 million barrels in United States crude oil inventories, compared to analyst expectations for a draw of 756,000 barrels for the week-ending September 29.
However, crude oil prices fell after the API report showed gasoline inventories rose 4.19 million barrels for the week-ending September 29. This was against an expected build of only 1.088 million barrels.
We’re going to watch how traders handle the test of the retracement zone after the EIA report. If gasoline comes in bigger-than-expected then sellers will take out this zone and prices will break sharply.
This article was originally posted on FX Empire
