Oil Price Fundamental Daily Forecast – Falling Demand, Rising Supply Casts Bearish Pall

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading over 4.50% lower on Friday after U.S. President Donald Trump tested positive for COVID-19 and negotiators failed to agree on a stimulus package just as rising global oil output threatens to overwhelm a weak price recovery.

At 10:32 GMT, December WTI crude oil futures are trading $37.34, down $1.67 or -4.28% and December Brent crude oil is at $39.20, down $1.73 or -4.23%.

Trump Tests Positive for COVID-19

The catalyst for the move is the news that President Trump had contracted COVID-19. The news triggered a volatile move in the financial markets and thrust COVID-19 back into the spotlight for investors.

The White House announcement is expected to heighten existing political uncertainty around the U.S. election on November 3, another major risk event for markets. Jeff Henriksen, co-founder and CEO of Thorpe Abbotts Capital called the president’s positive test a “game changer” for market behavior in the short term.

House passes $2.2 Trillion Democratic Coronavirus Stimulus Bill

In a symbolic move, the House passed a $2.2 trillion Democratic coronavirus stimulus plan on Thursday night even as Democrats and the Trump administration struggle to strike a relief deal.

The bill likely will not get through the Republican-held Senate and become law. Senate Majority Leader Mitch McConnell has opposed the legislation as his caucus resists spending trillions more on the federal response to the pandemic.

OPEC Crude Supplies Rise

Crude supplies from the Organization of the Petroleum Exporting Countries (OPEC) rose in September by 160,000 barrels per day (bpd) from a month earlier, a Reuters survey showed.

The increase was mainly the result of increased supplies from Libya and Iran, OPEC members that are exempt from a supply pact between OPEC and allies led by Russia – a group known as OPEC+.

Daily Forecast

While we don’t expect crude oil prices to crash like they did earlier in the year since the OPEC+ supply cuts provide a cushion against such a move, we do think that falling demand and rising supply will keep a solid lid on prices, preventing sustained rallies.

Trump’s positive COVID-19 test will heighten concerns about the spread of the coronavirus that could create renewed fears of shutdowns and restrictions.

One concern of mine is that Trump’s positive test will force investors to sit up and take notice that a vaccine isn’t going to be available for some time and that the coronavirus pandemic is likely to linger well into 2021. In other words, conditions are likely to get worse before they get better.

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