Oil Price Fundamental Daily Forecast – Down on Growing Concerns Over Global Oil Supply Glut

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply lower on Thursday on increasing concerns that a resurgence in the coronavirus pandemic will derail the economic recovery while putting a dent in the global demand recovery for fuels. Traders said governments’ renewed restrictions to curb a second wave of coronavirus infections and signs of a growing global oil supply glut are sending prices tumbling.

At 10:28 GMT, December WTI crude oil is trading $35.90, down $1.49 or -3.99% and December Brent crude oil is at $37.66, down $1.46 or -3.73%.

Breaking news is also weighing on prices with the release of a survey saying Saudi Arabia may cut or keep Asia crude prices steady in December.

Demand Outlook Deteriorating

Amid surging COVID-19 cases in Europe, France will require people to stay home for all but essential activities as of Friday, while Germany will shut bars, restaurants and theatres from November 2 through the end of the month.

The pressure on prices indicates that traders are worried about a second viral wave sweeping the U.S. and parts of Europe. Meanwhile, stricter social distancing measures and more lockdowns are expected to bring a larger-than-expected impact on global energy demand.

US Energy Information Administration Weekly Inventories Report

U.S. crude oil stockpiles rose last week as production surged, posting its largest one-week increase ever, while gasoline and distillate inventories fell, the Energy Information (EIA) said on Wednesday.

Crude inventories rose by 4.3 million barrels in the week to October 23 to 492.4 million barrels, much more than analysts’ expectations in a Reuters poll for a 1.2 million-barrel rise.

U.S. gasoline stocks fell by 892,000 barrels in the week to 226.1 million barrels, the EIA said, in line with expectations. Distillate stockpiles, which include diesel and heating oil, fell by 4.5 million barrels.

Production surged to its highest since July at 11.1 million barrels per day in a record weekly increase of 1.2 million bpd. Some of that was due to offshore facilities coming back online after Hurricane Delta.

Saudi Arabia May Cut or Keep Asia Crude Prices Steady in December: Survey

Top oil exporter Saudi Arabia may maintain or cut slightly its crude official selling prices (OSPs) for Asian buyers in December after benchmark Dubai prices and refining margins weakened, a Reuters survey showed on Thursday.

Three of six Asian buyers expect the December OSP for Saudi flagship grade Arab Light to fall by 10-20 cents a barrel from the previous month, while two others expected prices to hold steady, the survey showed.

Daily Forecast

WTI and Brent crude oil are getting close to retracing 50% to 61.8% of its rally from April. This is likely to raise red flags with OPEC+ who may start to seriously consider halting its plans to reduce production cuts on January 1.

The reported surge in U.S. production combined with Libya’s ramping up supply and OPEC+ considering easing off its current production curbs means we could see an inventory glut over the near-term.

The current sell-off reflects this concern as well as COVID-related demand loss.

For a look at all of today’s economic events, check out our economic calendar.