Crude Oil Fundamental Forecast January 10, 2017
Sellers hit crude oil futures hard on Monday at the start of the first full week of trading since the Christmas/New Year holiday season began. U.S. West Texas Intermediate and international Brent crude prices fell nearly 4 percent on supply concerns.
Traders are worried that increased U.S. output would undermine OPEC’s efforts to trim the global supply glut and stabilize prices. Traders also reacted negatively to reports of an increase in Iraqi crude exports.
March WTI Crude Oil futures closed at $52.87, down $2.00 or -3.64%. March Brent Crude Oil finished the session at $54.94, down $2.16 or -3.78%.
According to the Iraqi oil ministry, exports from the southern Basra ports reached a record high of 3.51 million barrels per day (bpd) in December. Unless Iraq offsets the high exports from the south with massive cuts in the north, some investors feel that Iraq will be the first country to renege on its promise to reduce output.
Crude Oil Fundamental Forecast
A bearish story is starting to unfold in the crude oil market. Last week started with optimism surrounding OPEC and non-OPEC production cuts. A little more than a week into the start of the deal we’re already starting to hear about possible non-compliance issues with Iran.q 0
However, until the meeting of the compliance monitoring committee in Vienna on January 21-22, it’ll all be speculation. If the numbers are right, however, then it may look like Iran has not kept up their end of the bargain. In the meantime, the price action suggests investors are not going to wait another 12 days to get confirmation and are selling now.
Additionally, pressure is likely to continue because of predictions that the U.S. rig count will continue to rise throughout 2017. Barclays said on Monday that the number of producing rigs in the U.S. could jump from 529 last week to 850-875 by the end of the year.
Finally, with speculative long positions nearing a record, the market will need to be fed a continuous stream of bullish news or these longs will start liquidating their positions. This will drop prices further.