Oil Price Fundamental Daily Forecast – Speculators Have Tripled Short Positions Since Mid-September

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower shortly before the regular session opening on Monday. The markets opened steady to better, but turned lower amid ongoing concern that a fragile economic outlook will continue to weigh on fuel demand. Last week, U.S. crude lost 1.66% and Brent was off by 1.83%.

At 10:32 GMT, December WTI crude oil is trading $53.49, down $0.40 or -0.71% and December Brent crude oil is at $58.85, down $0.57 or -0.96%.

Weakening China Economy

Trader are bracing for two key meetings in China, where policymakers will address recent reports that economic growth will slip further from its lowest in almost three decades. China’s growth slowed to 6% year-on-year in the third quarter, its weakest in 27-1/2 years and short of expectations due to soft factory production and continuing trade tensions.

Speculators Betting on Lower Prices

According to the Commodity Futures Trading Commission (CFTC), speculators have almost tripled short positions in U.S. crude futures since mid-September as Washington and Beijing struggle to finalize a trade deal.

Short-selling of WTI has climbed to 114,709 futures and options, from just 39,948 in the week-ended September 17, according to the CFTC data. Net-long positions, or the difference between the long and short positions, shrank 8.8%.

OPEC Moves

Talks between OPEC members Kuwait and Saudi Arabia to restart oil production from joint fields in the Neutral Zone between the two countries, with capacity of 500,000 barrels per day could mean more supply returning to the market.

Kuwait’s deputy foreign minister on Saturday said negotiations were “very positive” after Kuwaiti media, citing unidentified sources, said the two Gulf oil producers has agreed to resume crude output from the oilfields.

But any increase in Neutral Zone production from will be compensated by a supply cut from other Saudi Arabian and Kuwaiti fields as both countries are committed to their targets under the OPEC+ output reduction agreement.

Daily Forecast

The US and China aren’t moving fast enough toward a trade deal to offset the damage being done to the global economy and hence, demand growth for crude oil. Therefore, a further deterioration in prices will force OPEC to take action in December to stabilize prices.

Oil prices could gain support if OPEC and its allied producers decide to curb supplies in December. The Organization of the Petroleum Exporting Countries and its allies meet on December 5-6 in Vienna to review output policy.

OPEC Secretary-General Mohammad Barkindo has said deeper output cuts are an option. Last week, he said OPEC would do what it could with allied producers to sustain oil market stability beyond 2020.