Oil Price Fundamental Daily Forecast – Biggest Concern for Short-Sellers Should Be Complacency
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher, while trading inside yesterday’s range. The moves suggest investor indecision and impending volatility. This could mean that traders feel the selling has been a little excessive. It probably doesn’t mean the trend is getting ready to change to up, but I wouldn’t rule out a short-term retracement. This move may be necessary to alleviate some of the downside pressure.
At 11:19 GMT, May WTI crude oil is trading at $23.25, up $2.42 or +11.62%. June Brent crude oil is at $28.00, up $1.31 or +4.91%.
Any Gains are Likely to be Temporary
Tumbling demand due to the coronavirus outbreak combined with the collapse of the OPEC+ deal to curb production is expected to bring in a wave of supply starting April 1.
Saudi Arabia, the defacto leader of OPEC, which kicked off a price war with Russia that sent prices plunging, is planning to keep pumping at a record rate of 12.3 million barrels per day (bpd) for months.
“From April 1, about 4 million bpd could flood the markets, potentially pushing down crude oil prices into the teens,” Jefferies said in a note. “Unless somebody intervenes, no oil producer benefits from the current environment.”
U.S. Officials Looking to Protect Jobs
While lower oil prices are likely to weigh on gasoline prices, which should help the consumer during these difficult times, prolonged lower prices will be devastating to the oil industry. U.S. firms will be forced to shut down production, which will lead to massive layoffs.
In an effort to prevent the shutdown of the U.S. oil industry, U.S. senators on Wednesday upped the pressure on Saudi Arabia and Russia to stop the price war and held talks with the kingdom’s envoy to Washington. They urged President Donald Trump to impose an embargo on oil from the two countries.
Algeria’s Energy Minister Sees Signs Oil Demand Will Improve
Algeria’s energy minister said on Wednesday that there are signs oil demand will improve during the second half of this year.
Minister Mohamed Arkab was talking to state TV saying “there ae also positive signals from China that it is overcoming coronavirus which will have a positive impact on demand in China.”
Daily Forecast
Continue to trade the trend, but don’t get complacent. The market is going down because traders anticipate a flood of oil to hit supply on April 1. Given the current turmoil in the financial markets, you have to be prepared for the unknown, such as the possibility that Saudi Arabia and Russia reach a truce.
If the Saudi’s and Russians somehow back away from their threats to increase production then crude oil could snap back $10 to $15 rather quickly.
This article was originally posted on FX Empire
