Oil Fundamental Forecast – May 1, 2017

Crude oil futures are called steady early Monday. There were no major events over the week-end to generate any volatility.

June West Texas Intermediate crude oil futures traders face two decisions today. The first is whether to go after the short-term resistance at $50.09, $50.20 and $50.22. The second is whether to take a run at last week’s low at $48.20 and the March bottom at $47.58.

I guess the key challenge is trying to figure out the news that will drive the market through the resistance or through the support. Reports of increased production are likely to keep the downside pressure on prices. Reports of an extension of the OPEC-led plan to cut output should provide support.

In other news, the U.S. rig counts rose by nine to 697 total rigs on the week, according to Baker Hughes data, marking 15 straight weeks of increases.

Additionally, U.S. President Donald Trump signed an order to allow offshore oil and gas drilling in more locations, though these projects tend to take years. Offshore lease activity is now near five-year lows.

Over the week-end, Iran’s Oil Minister said OPEC and non-OPEC countries had given positive signals for an extension of output cuts, which Tehran would also back.

“During these last days we received a positive signal from OPEC members and non-OPEC contributors in this agreement for cutting the production for extending this agreement for the second half of 2017,” Minister Bijan Zanganeh told reporters.

OPEC meets on May 25 to discuss oil supply policy. Oil prices fell last week though they closed higher on Friday on growing hope that OPEC might agree to extend production cuts long enough to reduce a global crude glut.

With the OPEC meeting coming up, I expect the crude oil market to remain rangebound. I don’t think investors are going to commit too much in either direction. Most of the price action is likely to be rangebound.