Oil Price Fundamental Daily Forecast- Testing Retracement Zone Support, but Needs News to Resume Rally
U.S. West Texas Intermediate and international-benchmark Brent crude oil tumbled on Monday on concerns that a global supply glut may not be clearing as quickly as some had hoped.
November WTI crude oil settled at $50.58, down $1.09 or -2.11% and December Brent crude oil closed at $56.12, down $0.67 or -1.18%.
Traders are saying that seasonality may have a negative effect on crude oil prices. According to research, the fourth quarter has not been good for crude oil appreciation historically. Traders blamed this occurrence on the switch from summer demand to expectations of winter demand. Analysts are also saying that a lot of refinery maintenance occurs at this time so feeder demand is not there.
In other news, Iraq said on Monday that exports rose slightly in September from its southern oilfields, while an earlier Reuters survey indicated that OPEC overall boosted output. Additionally, Turkey has not carried out its threat to shutdown pipelines.
Forecast
The correction in the market did not come as a surprise after last week’s price action suggested the selling may be stronger than the buying at current price levels. Essentially, buyers were presented with the choice: buy strength or play for a pullback. They were only going to buy strength if the news dictated such a move.
The primary downside target for the WTI contract is $50.23 to $49.60. The upper level of this zone was touched on Monday. The primary downside target for the Brent contract is $55.88 to $55.17. Yesterday’s sell-off drive prices into this zone.
The next move in the market will be determined by how investors respond to the sell-off into the potential support zones.
If bullish news corresponds with the price action then look for a rally. If there is no news then sellers are likely to continue to probe the short-side until they find value.
Traders are currently worried that the recent price rise has encouraged U.S. shale producers to ramp up production. We may find out late Tuesday if the American Petroleum Institute’s weekly inventories report reflects greater output and on Wednesday with the release of the U.S. Energy Information Administration’s weekly inventories report.
This article was originally posted on FX Empire
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