Oil Price Fundamental Daily Forecast – Boosted by Hopes for Relaxed China COVID Controls, OPEC+ Output Cuts

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are soaring on Tuesday, bolstered by hopes that China would relax its COVID-19 controls after overnight data showed a drop in new infections and following rare protests against the country’s zero-COVID strategy over the weekend in big Chinese cities.

At 11:25 GMT, January WTI crude oil futures are trading $79.23, up $1.99 or +2.58% and February Brent crude oil futures are at $86.27, up $2.38 or +2.84%. On Monday, the United States Oil Fund settled at $66.89, down $0.07 or -0.10%.

Oil prices are also being supported by the expectation that major oil producers would adjust their production plans at the upcoming meeting.

We’re also going to get some data later today on U.S. inventories, which could give us some guidance ahead of Wednesday’s official U.S. government report.

New COVID Cases Drop in China

China held a press conference on COVID prevention and control measures early Tuesday amid record COVID infections and protests in Shanghai and Beijing. At the conference, officials released news that was interpreted as bullish by oil traders.

China reported a decline in new COVID-19 infections for Nov. 28. The country said local infections, mostly asymptomatic, totaled 38,421, down from a record high of 40,052 reported for Sunday, according to CNBC calculations of Wind Information data.

The last time the daily case count fell from the prior day was on November 19, the data showed.

Additionally, there was no indication of new protests on Monday. Over the weekend, students and groups of people across China held public demonstrations to protest the country’s stringent zero-COVID policy.

 OPEC+ to Discuss Fresh Production Cuts

WTI and Brent crude oil posted a dramatic turnaround on Monday on the thought that OPEC and its allies would be considering a fresh round of output cuts at its next meeting.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, are set to hold a meeting on Dec. 4. Analysts at Eurasia Group suggested in a note on Monday that weakened demand out of China could spur OPEC+ to cut output.

Short-Term Outlook

China relaxing COVID restrictions and OPEC+ announcing additional cuts to output would be game changing moves and could be a major turning point for  prices.

The OPEC+ decision would be particularly bullish since it would give traders the confidence to buy dips aggressively in the market on the notion that OPEC+ has their backs.

Later today at 21:30 GMT, the American Petroleum Institute (API) will release its latest weekly inventories figures. It is expected to show a drop of 3 million barrels of crude oil.

Traders will also be monitoring the U.S. Dollar since a weaker greenback tends to support dollar-denominated crude oil.