Oil prices are trading mixed early Monday in what is expected to be a light trading day ahead of Tuesday’s U.S. Fourth of July bank holiday. Buyers are reacting to the first drop in U.S. drilling activity in 24 weeks. Sellers are still banking on rising output from OPEC despite a pledge to cut supplies to cap gains.
At 0400 GMT, August West Texas Intermediate (WTI) crude oil futures are trading slightly higher at $46.21, up $0.17 or +0.37%. September Brent crude oil futures are trading $48.87, up $0.10 or +0.21%.
In the absence of major news, last week’s key fundamentals are still influencing today’s early price action. To recap:
According to the U.S. Energy Information Administration, U.S. crude oil inventories edged up the week-ending June 23 while gasoline stocks decreased. The EIA report showed crude inventories rose 118,000 compared with forecasts for a 2.6 million-barrel decrease, as imports rose 129,000 barrels per day and refinery runs fell 262,000 bpd.
Most importantly, U.S. production fell 100,000 bpd to 9.25 million bpd. And refinery utilization rates fell 1.5 percentage points to 92.5 percent of operable capacity, EIA data showed.
Money managers cut their net long U.S. crude futures and options positions in the week to June 27 to the lowest since late September, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
Finally, U.S. drillers cut two oil rigs in the week to June 30, the total rig count of 756 is still more than double the count the same week a year ago, Banker Hughes said on Friday.
Forecast
We’re expecting lower-than-average trading volume due to what some traders are calling is a four-day week-end. Underpinning the market is last week’s decline in U.S. production and a drop in the total rig count.
Gains could be capped by reports of a rise in OPEC production in June. Output from within OPEC was up 280,000 barrels per day (bpd) to an estimated 2017 high of 32.72 million bpd. The rise in output is primarily being driven by increased production from Libya and Nigeria.
The charts show the WTI futures contract is slightly stronger than the Brent futures contract. This is because U.S. production declined and OPEC production rose.
If the rally continues this week, the primarily upside target for August WTI crude will be $47.14 and for September Brent it’s $49.78.
This article was originally posted on FX Empire