Oil Price Fundamental Daily Forecast – Disappointment in OPEC+ Decision Capping Gains

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading slightly lower late Monday after clawing back most of its earlier losses. Prices slipped on the opening as the positive impact from COVID-19 vaccine news and an OPEC+ deal on oil production cuts was undermined by surging coronavirus cases and heightened tensions between the United States and China.

At 06:42 GMT, January WTI crude oil futures are trading $46.13, down $0.13 or -0.28% and February Brent crude oil futures are at $49.05, down $0.20 or -0.41%.

The weak price action could also be indicating disappointment in the OPEC+ decision to compromise on a deal to increase production limits.  Both futures contracts jumped around 2% last week after OPEC+ agreed to increase output slightly from January but continue the bulk of existing supply curbs.

With the OPEC deal in the rearview mirror, traders are now being forced to look at the grim reality of the current supply/demand situation.

On the supply side, there was a report over the weekend that Iran has instructed its oil ministry to prepare installations for the production and sale of crude oil at full capacity within three months, state media said on Sunday.

On the demand side, a surge in coronavirus cases globally has forced a series of renewed lockdowns, including strict new measures in the U.S. state of California and in Germany and South Korea.

Additionally, gasoline consumption fell during the Thanksgiving holiday week to the lowest in more than 20 years, OPIS said, as lockdowns weighed on fuel consumption.

Perhaps helping to offset these events, China reported that its exports in November rose at their fastest pace since February 2018, helped by strong global demand and as the recovery in manufacturing in the world’s second-largest economy outpaced those of its major trading partners.

In other news, gains may have been capped and prices pressured after Reuters reported that the United States was preparing to impose sanctions on at least a dozen Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong.