Crude oil prices are trading slightly higher early Monday. There were no major news events over the weekend so the price action is likely related to oversold technical conditions and position-squaring ahead of this week’s rollover into the September futures contract for U.S. West Texas Intermediate and the October futures contract for international-benchmark Brent.
At 0212 GMT, August West Texas Intermediate crude oil is trading $44.59, up $0.36 or +0.81% and September Brent crude oil is at $47.06, up $0.35 or +0.75%.
Since traders are likely reacting to the charts at this time, WTI traders should watch the price action and read the order flow at $44.69 to $44.06. Simply stated, look for a slight upside bias to begin on a sustained move over $44.69 and for the downside bias to continue on a sustained move under $44.06.
The key area to watch for Brent crude is $47.22 to $46.69. A sustained move over $47.22 will give the market a slightly upside bias. A sustained move under $46.69 will create a downside bias.
Fundamentally, the markets are still under pressure from strong production in the U.S. and ample supplies from OPEC despite its efforts to curb production and stabilize prices.
While most traders are likely to continue to focus on the bearish fundamentals including increasing U.S. drilling activity and higher production, some speculators may be attracted to the price since the markets have reached a value zone inside their recent range.
Technical factors may make the market an attractive buy today but the bearish factors are likely to limit gains. These include increased U.S. drilling activity, U.S. higher production and a rise in OPEC supply.
Last week, U.S. firms added seven oil drilling rigs, marking the 24th week of increases out of 25 and bringing the total count up to 763, the most since April 2015, according to energy services firm Baker Hughes.
The U.S. Energy Information Administration also reported last week that U.S. oil production has risen over 10 percent since mid-2016 to 9.34 million barrels per day (bpd).
Finally, Reuters reported that OPEC exported 25.92 million barrels per day (bpd) in June, 450,000 bpd more than in May and 1.9 million bpd more than a year earlier.
Forecast
Technical factors may lead to a short-covering rally today if WTI buyers can overcome $44.69 and Brent buyers can sustain a move over $47.22. Bearish fundamental factors will keep a lid on the gains, however.
This article was originally posted on FX Empire