U.S. West Texas Intermediate and international-benchmark crude oil futures are edging higher early Monday. The catalysts behind the rally are supply concerns in the Middle East and signs of tightening in the U.S. as well as increasing demand in Asia.
At 0543 GMT, December WTI Crude Oil futures are trading $52.09, up 0.25 or +0.48% and January Brent Crude Oil futures are at $57.71, up 0.13 or +0.23%.
In other news, on Friday, the amount of U.S. oil rigs for new production fell by seven to 736 in the week to October 20, the lowest level since June, according to General Electric Company’s Baker Hughes energy services.
Thompson Analytics is reporting that consumption remains strong especially in China and India, the world’s number one and three importers. India imported a record 4.83 million barrels per day (bpd) of oil in September. The country’s September imports stood 4.2 percent above this time last year and about 19 percent more than in August.
Today’s early trade shows both futures contracts sitting above the psychological $50 level as possible supply disruptions in the Kurdish region of Iraq continue to support prices. The price action suggests there is enough light-buying to underpin prices, but not enough yet to send the markets through recent highs. This indicates the hedge funds are still a little tentative about chasing prices higher at current price levels. If and when they finally recommit to the long side, then we can expect a strong price surge.
Prices are also being supported by the lingering impact on production by Hurricane Harvey which hit the Texas Gulf Coast area nearly two months ago and a third week of declines in the number of U.S. drilling rigs.
Given the tightening oil market conditions, prices should continue to be underpinned. An escalation in fighting between Iraq and the Kurds could spike prices higher if it continues to impact supplies in the region. However, a more bullish impact on prices will occur when the OPEC-led group finally decides to extend or deepen its current production cuts.
This article was originally posted on FX Empire
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