WTI and Brent Crude Oil

Oil Price Fundamental Daily Forecast – Price Action Indicates Traders Believe Demand Will Outstrip Supply

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading relatively flat on Friday in a lackluster trade as investors do a little position-squaring ahead of the weekend following a volatile, but profitable week.

The catalyst behind this week’s gains has been reduced to the simplest of terms:  bullish traders believe that demand will continue to outstrip supply until at least the end of the year.

At 13:15 GMT, September WTI crude oil futures are trading $73.63, up $0.01 or +0.01%, and October Brent crude oil is at $75.13, up $0.03 or +0.04%.

The week began with a steep sell-off due to concerns over demand destruction as bearish traders increased bets the surging coronavirus delta-variant would slow down the pace of global economic growth.

After a plunge on Monday, buyers stepped in to successfully stop the price slide because they believe that demand will continue to grow the next four months, while vaccinations are expected to alleviate the impact of a resurgence in COVID-19 infections across the globe.

Although buyers and sellers battled it out for two sessions earlier in the week, those with a bullish outlook eventually prevailed when private industry and government inventories data confirmed the strong demand.

The case for stronger demand was further strengthened on Wednesday when the U.S. Federal Reserve confirmed that economic progress was being made. The supply picture even became a little rosier after a story circulated that progress in talks between the United States and Iran over a nuclear deal had stalled, further pushing forward an additional supply from the rogue nation.

Daily Forecast

Although the price action is a little mixed on Friday, the market remains underpinned. This is pretty clear evidence of the presence of buyers even as coronavirus cases rise and parts of the world revert back to lockdowns and restrictions that are not as harsh as we saw during the peak of the pandemic year in 2020. This also offers further evidence that bullish traders believe that higher vaccination rates will keep the new surge under control.

“The oil market no longer appears to be viewing the issue of the Delta variant with quite the same alarm as it was at the beginning of last week,” said Commerzbank analyst Carsten Fritsch.

“There is confidence that the ongoing vaccination campaigns in the industrialized countries will prevent any reintroduction of widespread mobility restrictions,” he added.

“Delta is a risk, but is it going to derail demand growth in the second half?  We may not see that,” said Commonwealth Bank commodities analyst Vivek Dhar.

This bullish theme is likely to carry over into next week with the next major challenge for traders – the fair pricing of crude oil – with OPEC+ expected to begin upping production by 400,000 barrels per day on August 1.

For a look at all of today’s economic events, check out our economic calendar.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.