Oil Price Fundamental Daily Forecast – Weaker Shorts Covering as US, Russia Agree to Talk About Price Crash

James Hyerczyk

U.S. West Texas Intermediate and international benchmark Brent crude oil futures are edging higher on Tuesday as U.S. President Donald Trump and Russian President Vladimir Putin agreed to discuss stabilizing energy markets. The news is fueling a short-covering rally early in the session, but most traders believe gains will be limited due to the demand destruction caused by the coronavirus shutdown.

At 09:06 GMT, May WTI crude oil is trading $21.25, up $1.16 or +5.82% and June Brent crude oil is at $27.15, up $0.73 or +2.76%.

US, Russian Oil Officials to Meet

U.S. President Trump and Russian President Putin agreed during a call on Monday to have their top energy officials meet to discuss the crash in global oil markets, according to the Kremlin. Earlier in the day, Trump called the oil price war between Saudi Arabia and Russia “crazy”. On Monday, WTI crude oil briefly fell below $20 per barrel and Brent crude sunk to its cheapest levels in 18 years.

Reasons for the Weakness

The current five week sell-off in crude oil is being fueled by plummeting demand from coronavirus disruptions and a pledge by Saudi Arabia and Russia to flood the market with oil after April 1. Both events have threatened higher-cost oil drillers in the U.S. and around the globe with bankruptcy.

Saudi Arabia and Russia have promised to flood the market with oil in April after talks collapsed earlier this month between the Saudi-led Organization of the Petroleum Exporting Countries and its allies led by Russia – a grouping known as OPEC+.

Riyahd said it would lift all restrictions on its oil output after Moscow refused to support a deep output cut.

In an interview with Fox News Channel on Monday, Trump said:  “I never thought I’d be saying that maybe we have to have an oil price increase, because we do.”

Daily Forecast

Weaker short sellers are covering positions because of the news, but the major players aren’t. Furthermore, they may even add to their short positions if the Saudi’s start to dump crude oil on the market later this week as promised.

I don’t think Trump and Putin are trying to gang up on the Saudi’s. I believe Trump is going to try to convince Putin to stop lowering prices because of the negative impact on the U.S. oil industry. After he’s done speaking with Putin, he’ll probably want to speech to the Saudis.

This article was originally posted on FX Empire