Crude Oil Weekly Fundamental Analysis, August 31 – September 4, 2015

Analysis and Recommendations:

October Crude Oil futures finished the week up almost 12% from the previous week’s close after reaching a new low for the year at $37.75. Brent crude gained over 15 percent. The catalysts behind the move were a strong recovery in global equity markets, fresh stimulus measures from China and news of shrinking crude supplies.

Additionally, better than expected U.S. GDP numbers also helped underpin the market. Word of a force majeure on BP’s exports from Nigeria also helped extend the gains. Late in the week, Venezuela pushed for an emergency meeting of OPEC, hoping it would respond to the recent collapse in crude oil prices.

The major trend remains down, however, there has been a shift in momentum to the upside, which has been largely driven by short-covering. Traders should remain cautious, however, since the jump in prices could be short-lived due to the supply glut.

Last week, the U.S. Energy Information Administration reported that crude oil inventories declined by 5.5 million barrels the week-ending August 21. Traders were looking for a 1.0 million barrel increase. In order to extend the rally this week, this report must show that demand is outstripping supply.

Besides the weekly supply data, crude oil futures may be particularly sensitive to U.S. ISM Manufacturing PMI data on Tuesday and Factory Orders on Wednesday. The week ends with the U.S. Non-Farm Payrolls report.

The wildcards this week will be fresh news from Nigeria and Venezuela. In Nigeria, continued unrest in the country could provide further support after Shell’s Nigeria unit declared a force majeure on crude oil exports last week. Two key pipelines were also closed due to a leak and theft.

Traders will also be watching for a response from OPEC to Venezuela’s request for an emergency meeting. Agreeing to a meeting may raise speculation that the cartel is willing to consider easing production. This could lead to further short-covering.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks. 

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