Oil Price Fundamental Daily Forecast – Gains Capped by OPEC Demand Warning, Supported by Middle-East Tension

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading slightly lower at the mid-session after posting a choppy, two-sided trade earlier in the session.

Prices rose early Monday, driving nearby Brent back above $50 a barrel, on the hopes that a rollout of coronavirus vaccines will lift global fuel demand while a tanker explosion in Saudi Arabia rattled traders’ nerves.

At 17:45 GMT, February WTI crude oil futures are trading $46.66, down $0.09 or -0.19% and February Brent crude oil is at $49.88, down $0.09 or -0.18%.

Prices fell shortly before the mid-session after OPEC said on Monday that global oil demand will rebound more slowly in 2021 than previously thought because of the lingering impact of the coronavirus pandemic.

Vaccination Campaign Kicks-Off, but Pandemic Concerns Linger

The United States kicked off its vaccination campaign against COVID-19, buoying hopes that pandemic restrictions could end soon and lift demand at the world’s largest oil consumer.

Major European countries continued in lockdown mode to curb the spread of COVID-19 which has reduced fuel demand. For example, Germany, the fourth largest economy in the world, plans to impose stricter lockdowns from Wednesday to battle the virus.

Shipping Firm Hafnia Says Oil Tanker was Hit by External Source

Shipping company Hafnia said on Monday that one of its oil tankers had been hit by an unidentified external source caused fire and explosion while the ship was discharging at Jeddah port in Saudi Arabia.

“BW Rhine has been hit from an external source whilst discharging at Jeddah, Saudi Arabia at approximately 00:40 local time on 14 December 2020, causing an explosion and subsequent fire onboard,” Hafnia said in a statement on its website.

OPEC Cuts 2021 Oil Demand Outlook Again as Pandemic Impact Lingers

The lingering impact of the COVID-19 pandemic is hampering efforts by OPEC and its allies to support the market, leading OPEC to warn that the rebound in demand in 2021 will be slower than expected.

Demand will rise by 5.90 million barrels per day (bpd) next year to 95.89 million bpd, OPEC said in a monthly report. The growth forecast is 350,000 bpd less than expected a month ago.

The cartel has steadily lowered its 2021 demand growth forecast in recent months.

Short-Term Outlook

Prices are rebounding from earlier weakness because traders probably realized that OPEC+ has the power to adjust production to offset any perceived weakness in demand. Furthermore, traders are becoming more optimistic about a friendly Brexit deal and a coronavirus-relief package. Additionally, the rollout of the vaccine appears to be offsetting concerns over lockdowns, restrictions and a surge in COVID-19 cases.