Oil Price Fundamental Daily Forecast – Deeper OPEC+ Production Cuts Began Jan 1

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher early Thursday as a thaw in U.S.-China trade relations is raising hopes for increased demand growth, while renewed tensions in the Middle East have raised red flags over potential supply problems.

CNBC is reporting that both benchmarks ended higher in 2019, posting their biggest annual gains since 2016, buoyed at the end of the year by a thaw in the prolonged trade war between the United States and China and a deeper output cut pledged by OPEC and its allies. However, keep in mind the performance is deceiving because the move took place after a steep drop in prices between October and December 2018.

At 11:04 GMT, February WTI crude oil futures are trading at $61.12, up $0.07 or +0.10% and March Brent crude oil is at $66.23, up $0.23 or +0.35%.

2020 Forecast

In 2020, Brent is forecast to average $63.07 a barrel, up from December’s estimate of $62.50, while WTI is forecast to average $57.70 a barrel, up from December’s estimate of $57.30, as the OPEC-led supply cuts and the expectations of a U.S.-China trade deal boosted analysts’ views on the prospects for the year, a Reuters poll showed.

Deeper Production Cuts Began January 1

As promised in late November/early December, OPEC and its allies, including Russia have begun cutting another 500,000 barrels per day (bpd) of crude oil, on top of their previous cut of 1.2 million bpd that started on January 1, 2019.

Trade Deal Update

U.S. President Donald Trump said on Tuesday the U.S.-China Phase 1 trade deal would be signed on January 15 at the White House. Hopefully, many of the details of the deal will also be revealed at that time since this has been a major concern for some investors. Additionally, there has been no word on when Phase 2 negotiations will begin.

Weekly Inventories Expectations

Official weekly inventories data from the Energy Information Administration (EIA) is due to be released on Friday at 16:00 GMT. Traders are looking for a draw of 3.1 million barrels.

Late Tuesday, the American Petroleum Institute (API) reported a drop in U.S. crude stocks by 7.8 million barrels in the week ended December 27, compared with analysts’ expectations for a decrease of 3.2 million barrels.