Oil Price Fundamental Daily Forecast – Extending Gains Amid Optimism Over Stimulus, OPEC Output Cuts

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures extended gains on Tuesday on expectations that central banks are likely to enact financial stimulus to offset the impacts of the coronavirus outbreak and growing optimism that OPEC will order deeper output cuts this week. Both futures contracts rose by more than 4% on Monday.

At 10:02 GMT, April WTI crude oil futures are trading $48.31, up $1.56 or +1.55% and May Brent crude oil is at $53.38, up $1.48 or +2.85.

Oil prices soared on Monday after the world’s largest economies signaled they will unite in fighting the economic impact of the coronavirus and on Russia leaning toward agreeing to deliver deeper production cuts at this week’s OPEC meeting in Vienna on March 5 and 6.

Central Bankers to Hold Conference Call to Discuss Coordinated Response to Coronavirus

Global financial ministers and central bankers will hold a conference call on Tuesday to coordinate the financial and economic response to the coronavirus. The teleconference call will be led by Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell on Tuesday at 12:00 GMT, CNBC’s Steve Liesman reported. Representatives of the Group of Seven industrialized nations will attend the call.

Crude oil traders are hoping the central banks promise to bring monetary and fiscal stimulus.

OPEC+ to Announce Deeper Output Cuts

OPEC and its allies, a group known as OPEC+, are expected to announce deeper output cuts at their meeting on March 5-6 in Vienna. The group had agreed to cut output by 1.7 million bpd in a deal that runs to the end of March. The deeper cuts are expected to be about 600,000 bpd.

Although many expect Russia to go along with the production cuts after saying for weeks they will not necessarily revive oil demand, Russian President Vladimir Putin on Sunday said that current prices are acceptable for his country’s budget and that Russia has sufficient resources to contend with any deterioration in the global economy.

Supply Expected to Rise

Oil stockpiles in the United States are expected to rise for a sixth week by 3.3 million barrels, while refined product inventories are forecast to fall, according to a Reuters poll. The first inventories report this week is from the American Petroleum Institute (API) on Tuesday at 21:30 GMT.

Daily Forecast

The OPEC output news should be enough to underpin prices, but the expected coordinated rate cuts could disappoint if the central bankers fail to deliver what the market expects – monetary and fiscal stimulus. It’s unknown if they will deliver one or both key measures.

Furthermore, with the coronavirus spreading globally, crude oil demand could continue to suffer until traders can calculate a return of normal travel and trade.