Oil Price Fundamental Daily Forecast – Weak Dollar, Low Saudi Output Expectations Lifting Prices

US West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher at the mid-session on Friday. The weak greenback is making the dollar-denominated asset more attractive to foreign buyers. Encouraging investors to probe the long side was a successful test of a key support area and value zone on Thursday.

At 17:52 GMT, September WTI crude oil futures are trading $94.91, up $2.08 or +2.24% and September Brent crude oil futures are at $101.16, up $2.06 or +2.08%. The United States Oil Fund ETF (USO) is trading $73.80, up $0.95 or +1.30%.

Prices are also jumping after a U.S. official told Reuters that an immediate Saudi oil output boost was not likely to happen. Additionally, investors are questionning whether OPEC has the room to significantly ramp up crude production. Also supporting crude oil prices were the lowering of Fed rate hike expectations.

Dollar Dip Boosts Foreign Demand for US Crude

The dollar is down on Friday as investors evaluated how high the Federal Reserve is likely to raise interest rates by when it meets later this month on July 26-27 and as investors took profits after a strong rally that sent the greenback to a two-decade high on Thursday.

The weaker greenback may be helping to generate some demand from foreign buyers.

Successful Test of Technical Support

On Thursday, both WTI and Brent crude oil tested key 7-month retracement zones. Judging from today’s follow-through rally, it’s safe to say that traders recognized these zones as value. However, it’s too early to say whether new buyers or short-covering is fueling the rally.

The September WTI crude oil retracement zone is $89.54 to $82.80. The September Brent crude oil retracement zone is $93.16 to $86.42.

No Immediate Saudi Output Boost Expected

A U.S. official dampened expectations of any immediate oil supply boost.

U.S. national security adviser Jake Sullivan said, “We believe any further action taken to ensure that there is sufficient energy to protect the health of the global economy, it will be done in the context of OPEC+. We are hopeful that we will see additional actions by OPEC+ in coming weeks.”

Short-Term Outlook

The odds that Saudi Arabia will immediately boost oil output are pretty slim. Meanwhile, the market will have to wait for the official decision from the OPEC+ group, including Russia, on August 3.

Commenting on today’s rally and the chances of additional output was John Kilduff, partner at Again Capital LLC in New York. He said, “Part of the support is that everybody and their brother who digs down into the Saudi situation see that they don’t have a lot of capacity left.”