Oil Price Fundamental Daily Forecast – Underpinned by OPEC+ Production Cuts, Capped by Demand Issues

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading nearly flat after recovering from early session weakness. The market opened lower despite a higher close the previous session, but a stronger U.S. Dollar and weaker demand for riskier assets dampened Wednesday’s bullish sentiment.

At 10:51 GMT, December WTI crude oil futures are trading $40.33, up $0.11 or +0.27% and December Brent crude oil is at $42.31, up $0.05 or +0.12%.

Crude oil prices fell on the opening after state news agency INA quoted Abdul Jabbar as telling state-owned daily newspaper al-Sabah that he expected to reach an agreement soon with OPEC and its allies over increasing Iraq’s crude oil exports.

The news was bearish for oil prices because increased supply is not what the oil market needs at this time. With the resurgence of COVID-19 cases around the world, lower demand is expected to drive up supply. So more oil dumped on the market would’ve added to the already existing supply glut.

Oil prices reached their low and turned higher after Iraq’s oil ministry on Thursday denied the media report.

“The oil minister did not make these comments and did not meet the newspaper’s reporter,” oil ministry spokesman Asim Jihad told Reuters. The INA article has since been deleted.

U.S. Energy Information Administration Weekly Inventories Report

U.S. crude, gasoline and distillate inventories all fell last week, EIA data showed. Crude inventories fell by 1.6 million barrels, less than forecast; gasoline stocks dropped more than expected, sliding by 4 million barrels; while distillate stockpiles posted a surprise drawdown of 3.4 million barrels.

Daily Forecast

The price action this week suggests that WTI and Brent crude oil could be settling into a range. Helping to cap gains will be worries about demand while underpinning the market will be the OPEC+ production cuts.

As far as the EIA report is concerned, the drop in distillates is encouraging because it could be an early indicate of demand.

“The distillate overhang that we’ve seen most of this year has been a primary bearish consideration to the energy complex and as that begins to adjust lower that can be viewed as supportive,” said Tony Headrick, energy markets analyst at CHS Hedging.#CrudeOil#

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