Oil Price Fundamental Weekly Forecast – Short-Term Bullish as Traders Await Timetable for Repairs to Saudi Facilities

U.S. West Texas International and international-benchmark Brent crude oil futures are expected to open sharply higher on Sunday after a series of drone attacks hit a Saudi oil field and processing facility. The drone strikes are believed to have disrupted half the country’s production capacity, leading to the forecast for a $5 to $10 higher opening in the futures market.

This news will shift the focus back to the supply side after most of the bearish action last week was fueled by demand concerns. Last week, oil prices were pressured by concern about a weaker demand outlook that could lead to potential oversupply. This story outweighed hints of progress in the U.S.-China trade dispute as the world’s two largest economies prepared for new talks by making conciliatory gestures ahead of the discussions.

This week, traders are going to try to figure out how much the Saudi outage will impact supply. This will determine how high prices should realistically climb although we anticipate that aggressive speculators will initially drive the markets beyond this point.

Last week, both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) said oil markets could end up in surplus next year, despite a pact by OPEC and its allies to limit supplies. That program has been largely offset by growth in U.S. production.

At the end of the week, traders were saying that in order to avoid a price slide and a massive inventory build, OPEC and its allies would need to implement further voluntary production cuts. Talk about being careful what you wish for.