Oil Price Fundamental Daily Forecast – OPEC-led Supply Cuts Being Offset by Demand Concerns
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are under pressure on Monday as demand concerns over a global economic slowdown are outweighing the impact on supply of the highly successful OPEC-led supply cuts and the U.S. sanctions against Iran and Venezuela.
Reports that Russia will be fully compliant with the OPEC-led supply cuts by April may be providing some support, but Friday’s bearish comments from the International Energy Agency appear to be offsetting this news.
At 09:16 GMT, May WTI crude oil is trading $58.50, down $0.32 or -0.55% and May Brent crude oil is at $66.87, down $0.29 or -0.43%.
Bernstein Energy described the current situation this way, “The greatest downside risk to our oil price view is demand weakness on slower economic growth. Our base case is that global oil demand will increase by 1.3 million barrels per day (bpd) in 2019…A synchronized global slowdown in growth could push global demand growth to below 1 million bpd.”
The demand concerns are real given Friday’s report which showed U.S. manufacturing output fell for a second straight month in February. This report served as further proof of a slowdown in the U.S. economy during the first quarter.
The worries about demand weren’t isolated to the U.S. either as Japan also reported a drop in exports for a third straight month in February.
In other news, on Friday, Baker Hughes reported the number of rigs drilling for new oil production fell again last week, hitting their lowest level since April 2018, at 833 operating rigs.
Daily Forecast
Technical factors are also combining with concerns over demand to produce weaker results early Monday. These factors should continue to exert a bearish influence throughout the session. Look for lower prices today unless optimistic news about a trade deal between the U.S. and China is announced.
Prices could continue lower on Tuesday and Wednesday as investors await further information about U.S. production and inventories from the American Petroleum Institutes and Energy Information Administration respectively.
Helping to underpin prices will be the OPEC-led supply cuts so don’t expect a collapse in prices. Saudi Arabia said on Sunday that balancing oil markets was far from done as inventories were still high. Additionally, Russia also said production cuts would stay in place at least until June.
Technically, May WTI faces a wall of potential resistance at $59.25 to $59.63, and May Brent resistance comes in at $67.74 to $68.13.
This article was originally posted on FX Empire
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