Oil Price Fundamental Daily Forecast – Testing Support Zone, but Needs Catalyst to Chase the Weak Shorts
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Thursday after closing higher the previous session. Yesterday, the U.S. market settled higher for the first time since October 26. Brent closed higher for the first time since November 5.
The early price action suggests the selling pressure may be slowing especially since the markets failed to react to potentially bearish news from the American Petroleum Institute’s weekly inventories report.
At 0939 GMT, January WTI crude oil is trading $56.46, up $0.02 or +0.02% and January Brent crude oil is at $66.42, up $0.30 or +0.45%.
We’re only saying the selling pressure is slowing because we haven’t seen any strong evidence of short-covering yet. Taking out yesterday’s highs, for example, could encourage some of the weaker shorts to begin booking profits.
We haven’t seen any dramatic shifts in the fundamentals so we have to conclude that technical factors may be at work at this time. The major retracement zone for WTI crude at $58.95 to $54.79 is currently being tested. Holding this area could trigger a short-covering rally. The retracement zone for Brent at $67.53 to $63.11 is also being tested. As long as these zones hold, we could start to see some counter-trend buying.
In other news, late Wednesday, the American Petroleum Institute reported another huge build in crude oil inventory. During the week-ending November 9, inventories grew by 8.79 million barrels. This was the sixth such rise in as many weeks. Analysts were looking for a smaller build of 3.012 million barrels.
Inventories at the futures hub in Cushing, Oklahoma were a little friendly. They climbed by 726,000 barrels, lower than the 2.419 million estimate.
The API also reported a build in gasoline inventories for the week-ending November 9 in the amount of 188,000 barrels. Analysts were looking for a draw of 1.375 million barrels.
Distillates bucked the trend with a 3.224 million barrel draw. Traders were expecting a small draw of 1.610 million bpd.
Forecast
We get it. Supply is high and demand is starting to weaken, but these factors may have been fully-priced into the market on Tuesday when the markets spiked to the downside. We’re going to start watching the price action closely because of the slight change in the pattern. We are far from turning the trend to up, however, the markets may be ripe for a short-term, short-covering rally.
The key will be how traders react to the WTI range at $58.95 to $54.79. Aggressive counter-trend buyers may use $54.79 as a lean in an effort to pick a bottom. Other buyers may use $58.95 as a breakout point. For Brent, the numbers are $63.11 for support and $67.53 for the breakout.
Of course, bullish news would help to make these trade ideas work. The best news would be an announcement from OPEC that it convinced the Russians to go along with the idea of production cuts in 2019.
However, I think counter-trend buyers would settle for a bullish U.S. Energy Information Administration report today at 1600 GMT (Note the Different Time). Traders are looking for a 2.9 million barrel build.
This article was originally posted on FX Empire
