Oil Price Fundamental Daily Forecast – Clawing Back COVID-Related Demand Losses, but Needs Help from OPEC+

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Monday but bouncing back from a steep sell-off earlier in the session. Oil prices plunged shortly after the opening on worries that widening coronavirus lockdowns in Europe would weaken fuel demand and amid concerns about turbulence around this week’s U.S. presidential election.

At 11:51 GMT, December WTI crude oil is trading $34.81, down $0.98 or -2.74% and December Brent crude oil is at $37.48, down $0.17 or -0.45%.

COVID-19 Lockdowns Raise Demand Concerns

Countries across Europe have reimposed lockdown measures to try to slow COVID-19 infection rates that have accelerated in the past month.

In the U.S., new COVID-19 cases continue to climb, beating previous records as the pandemic worsens in nearly every corner of the nation. Experts expect the height of the country’s recent surge will be reached around Thanksgiving with December probably going to be the toughest month.

Over the weekend, U.K. Prime Minister Boris Johnson ordered England back into a national lockdown after the United Kingdom passed the milestone of one million COVID-19 cases and a second wave of infections threatened to overwhelm the health service.

Rising Output and Supply Glut Concerns

Sharply rising Libyan production also added to pressure on prices. Libya’s output currently stands at around 800,000 barrels per day (bpd), more than 100,000 more than a few days ago, a Libyan source told Reuters on Saturday. The pace suggests we’ll see 1,000,000 bpd by December.

OPEC’s oil output rose for a fourth month in October, a Reuters survey found.

Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil rose by 10 to 221 this week. That followed increases in each of the last five weeks. The total active U.S. rig count, meanwhile, was up 9 to 296.

U.S. crude production rose last week by 1.2 million barrels per day, the largest weekly gain on record, EIA data showed.

One Bright Spot

Oil pared some losses after Japan’s export orders grew for the first time in two years and China’s factory activity rose to a near-decade high in October. The market could continue to be underpinned later today if factory output data in the U.S. shows improvement. ISM Manufacturing PMI is expected to come in at 55.6, up from 55.4.

Daily Forecast

The markets are currently testing major support areas, but we’re not likely to see a rally out of this zone unless there is action by OPEC+ to reduce its planned production reductions. The move worked in April so it should at least stop the price slide this time.