U.S. West Texas Intermediate and internationally-favored Brent crude oil futures finished lower last week, driven down by a change in the same factors that drove them up the previous week – U.S. production and the U.S. rig count.
August crude oil futures settled at $44.23, down $1.81 or -3.93% and September Brent crude oil futures closed the week at $46.71, down $2.06 or -4.22%.
Oil Price Fundamental Weekly Forecast – Bearish Until Production Starts to Trend Lower
Prices continued to tumble late last week even after the release of potentially bullish inventories data from the U.S. government.
According to the U.S. Energy Information Administration (EIA), U.S. crude stocks fell 6.3 million barrels during the week-ended June 30. This was much better than the forecast of 2.4 million barrels. Traders said the draw was fueled by stronger refining activity and reduced imports.
U.S. gasoline stocks dropped 3.7 million barrels during the week-ended June 30, far exceeding the expected drop of 1.1 million barrels.
The EIA report also showed that U.S. oil production rose 1 percent to 9.34 million barrels per day (bpd) after a drop the previous week due to maintenance work and storm shutdowns.
In other news, according to energy services company Baker Hughes, U.S. drillers added seven oil rigs in the week to July 7. This brought the total count up to 763, the most since April 2015.
Forecast
The fundamentals remain bearish and the momentum is down so I expect prices to continue to retreat. This forecast is based on rising production from OPEC and the U.S. As long as the uptrend in production continues, the downtrend in prices should continue.
For the August WTI futures contract, the key area to watch is $44.69 to $44.06. A sustained move under $44.06 will indicate the selling pressure is increasing. A sustained move over $44.69 will be evidence of short-covering.
The key levels for the September Brent contract are $47.22 and $46.60. A sustained move under $46.60 will be bearish. A sustained move over $47.22 will be bullish but generated by short-covering.
This article was originally posted on FX Empire