Fundamental Forecast for US Oil: Bullish
It was a strong week for Oil prices, led by gains on Tuesday and Wednesday that are holding as we move towards this week’s close. After a pullback on Thursday, buyers returned on Friday to push prices back-up to fresh weekly highs; but the big item of interest from this week was US Crude Oil Price Outlook Bullish After Break Above Resistance. that’s built-in since the January highs, pointing to the possibility of further gains on the horizon. My colleague Tyler Yell discussed the long side of Oil in last week’s forecast, focusing-in on two fundamental drivers of relevance that have continued to support continued gains throughout this week.
US Oil Price Chart, Daily Time-Frame: Bullish Breakout from Bull Pennant Formation
Chart prepared by James Stanley
Geopolitical Risk Supporting Oil Prices – Surprising Drop in Inventories Brings the Bulls
Oil prices were already on the bid as we walked into Wednesday’s inventories data. A bit of geopolitical risk had helped to bring buyers into Crude after the Crown Prince of Saudi Arabia, Mohammad bin Salman met with President Donald Trump in Washington DC. Both leaders have been highly critical of the 2015 Iran Nuclear deal, and President Trump has previously mentioned the prospect of pulling out of the agreement altogether. This could bring on higher Oil prices given Iran’s role within OPEC, and that could be a very rational reason to look for a continuation of strength as US-Iran relations remain in a rather unsettled position.
But it was the inventories data on Wednesday that really seemed to grab the attention of Oil bulls. The expectation was for a build of 2.6m barrels. On Wednesday morning, the US Energy Information Administration reported that the actual print was for a -2.6m reduction; so considerably less supply than what was previously thought as the actual data came in a full -5.2m below the expectation. This led to a quick rush of strength that lasted through the US close, with WTI moving off of pre-report support around the $64-handle, all the way up to those fresh seven week highs at 65.69.
