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Oil Price Fundamental Daily Forecast – Concerns Over Lower Demand, Higher Supply Capping Prices

James Hyerczyk

U.S. West Texas Intermediate and Brent crude oil futures are trading mixed on Friday, while posting an inside move. The price action suggests investor indecision and impending volatility. The week began with buyers setting a bullish tone amid speculation OPEC and its allies would extend or even increase their output cuts, however, prices turned south mid-week as reports began to swirl that President Trump was considering easing sanctions against Iran, a move that would lead to increased supply.

At 11:11 GMT, November WTI crude oil is trading $55.16, up $0.11 or +0.22% and December Brent crude oil is at $59.39, down $0.07 or -0.12%.

Essentially, the bullish sentiment at the start of the week was fueled by optimism over supply. The bearishness at the end of the week is being fueled by a pessimistic outlook for demand.

Bullish Factors

The bullish factors this week were Saudi Arabia’s appointment of a new oil minister, OPEC and its allies’ pledge to continue to cut output by 1.2 million barrels per day, a bigger than expected draw down in U.S. crude oil inventories and optimism over a potential breakthrough in the U.S.-China trade dispute.

Bearish Factors

The bearish factors that stopped the early rally and drove prices sharply lower the last three days were speculation that President Trump would ease sanctions against Iran as a goodwill gesture ahead of a meeting with Iranian President Hassan Rouhani, and OPEC and IEA reports pointing to an oil surplus next year.

Daily Forecast

Technical factors are also playing a role in this week’s price action with resistance being provided by a 50% to 61.8% retracement zone at $57.00 to $58.84 and support coming in at $54.56 to $53.60 for WTI crude oil.

Brent crude has establish resistance at $60.90 to $62.22 and support at $59.03 to $58.15.

Increased demand for risky assets as well as stronger than expected U.S. retail sales and consumer confidence reports could underpin prices. Pressure could come from weak economic reports and a sell-off in the stock market.

As far as the news is concerned, a further easing of tensions between the United States and China could underpin prices, but the announcement of a meeting between U.S. President Donald Trump and Iranian President Hassan Rouhani could trigger a steep break.

This article was originally posted on FX Empire