Oil Price Fundamental Weekly Forecast – Money Managers Continue to Cut Bullish Positions
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures eked out a small gain last week. The markets were under pressure most of the week until Friday when it surged sharply higher on Middle Eastern concerns.
May WTI crude oil futures settled at $62.41, up $0.49 or +0.79% and June Brent crude oil finished at $66.05, up $0.78 or +1.20%.
The major theme last week was the potential for rising supply to overwhelm the expected gains in crude demand for 2018. This notion was supported on March 15 by a report from the International Energy Agency (IEA) which said global oil supply increased in February by 700,000 barrels per day (bpd) from a year ago to 97.9 million barrels per day.
The IEA also said supply from producers outside of OPEC, led by the U.S., will grow by 1.8 million bpd this year versus an increase of 760,000 bpd last year. This supply increase is more than the IEA’s expected demand growth forecast for this year of 1.5 million bpd.
Furthermore, the IEA said that commercial oil inventories in industrialized nations rose in January for the first time in seven months. Although this hardly suggests the trend is turning in favor of rising inventories, it does seem to indicate the downslide momentum generated by OPEC and Russia to cut supply may be coming to an end.
In other news, U.S. commercial crude oil inventories increased by 5.0 million barrels from the previous week. Total motor gasoline inventories decreased by 6.3 million barrels last week. Distillate fuel inventories decreased by 4.4 million barrels last week.
U.S. crude oil refinery inputs averaged 16.4 million barrels per day during the week-ending March 9, 2018, 432,000 barrels per day more than the previous week’s average. Refiners operated at 90.0% of their operable capacity last week.
Forecast
Prices spiked higher on Friday as investors covered short bets ahead of the airing of an interview with Saudi Arabia’s crown prince on U.S. news program “60 Minutes”. Gains were also supported by a jump in U.S. stock indices.
Hedge funds and other money managers cut their bullish bets on U.S. crude oil futures and options in the week to March 13, as crude prices fell for a second week, the U.S. Commodity Futures Trading Commission (CFTC) said.
U.S. drillers added four oil rigs this week, bringing the total count to 800, General Electric Co’s Baker Hughes energy services firm said. It was the seventh U.S. rig count rise in eight weeks.
Both the daily and weekly chart patterns indicate that a slight bias is developing to the downside. However, it also indicates impending volatility. This likely means that we are going to see a major move to the downside within the next 5 to 7 days. The longer the markets stay inside the triangle and under the retracement zones, the bigger the expected break. This will likely be triggered by aggressive hedge fund liquidation.
A number of factors could drive this week’s volatility including the interview by the Saudi Arabian Prince’s interview on “60 Minutes”, the increase in the rig count, the Fed’s monetary policy statement, trade war worries and the turmoil in Washington.
There are too many factors to consider this week to determine a direction, but we are confident that increased volatility will dominate the trade due to the emerging chart pattern and the number of potential events.
This article was originally posted on FX Empire
