Oil Price Fundamental Daily Forecast – Capped by Concerns Biden Could Authorize Sale from Strategic Reserve

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading flat early Tuesday as a number of bearish factors arose that offset some of the bullish news that drove prices higher the previous session.

At 06:55 GMT, December WTI crude oil futures are trading $81.98, up $0.05 or +0.06% and January Brent crude oil is at $83.51, up $0.08 or +0.10%.

Bullish Factors

Oil prices rose on Monday as positive signs for global economic growth supported the outlook for energy demand. The market was also supported by last week’s decision by OPEC+ to stick with its current plan to increase daily production by 400,000 barrels per day in December.

Bullish traders also welcomed congressional passage of a long-delayed $1 trillion infrastructure bill, which could boost economic growth and demand for fuel.

Adding to bullish sentiment, China’s export growth slowed in October but beat forecasts, buoyed by rising global demand ahead of the winter holiday season and improvements in coronavirus-hit supply chains.

Additionally, Saudi Arabia on Friday raised the price of its benchmark crude for customers in Asia in December, exceeding market expectations. “Saudi Arabia also reckons that the next few weeks will be tight. This is why its official selling price to Asia was increased by $1.40 a barrel,” said Tamas Varga, analyst at PVM Oil Associates.

Finally, global demand for jet fuel also looks set to take off as more governments make air travel easier with reduced pandemic-related restrictions.

Bearish Factors

Supply concerns are moving to the forefront early Tuesday. This is on top of the American Petroleum Institute (API) inventories report late Tuesday and the Energy Information Administration (EIA) on Wednesday. Traders are now concerned that the United States will take action to offset last week’s move by OPEC+ and this will increase supply.

Last week, President Biden had called on OPEC+ to produce more crude to cool the market and on Saturday said his administration had “other tools” to deal with high oil prices. Well, according to Reuters, Biden could announce which of his “other tools” he is planning on using this week.

Biden could take action as soon as this week to address soaring gasoline prices, Energy Secretary Jennifer Granholm said on Monday.

“He’s certainly looking at what options he has in the limited range of tools a president might have to address the cost of gasoline at the pump, because it is a global market,” Granholm told MSNBC in an interview. “Hopefully there will be an announcement or so this week,” she added but did not give any details.

Biden could authorize a sale from the U.S. Strategic Petroleum Reserve, which is held in a series of caverns on the Texas and Louisiana.

Finally, John Kemp from Reuters is saying that profit-taking is hitting hedge funds’ oil positions.

According to Kemp, Petroleum-related derivative markets were hit by the largest wave of hedge fund selling last week for almost three months as portfolio managers realized some profits after the recent rally in oil prices.

Hedge funds and other money managers sold the equivalent of 45 million barrels in the six most important petroleum-related futures and options contracts in the week to November 2.

Most selling was driven by the reduction of existing bullish long positions (-39 million barrels) rather than the creation of new bearish short ones (+6 million), consistent with profit-taking rather than aggressive short selling.