Oil Price Fundamental Daily Forecast – Higher Supply Expectations, COVID Demand Fears Pressuring Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Monday with traders betting on a supply increase after a high-ranking government official said the Biden administration should tap into emergency petroleum reserves immediately. Meanwhile, new concerns over demand are being raised due to rising COVID-19 cases.

At 14:01 GMT, January WTI crude oil futures are trading $78.60, down $1.09 or -1.37% and January Brent crude oil is at $81.05, down $1.12 or -1.36%.

Biden Must Tap Oil Reserves to Lower Gasoline Prices, Schumer Says

President Joe Biden’s administration should tap into emergency petroleum reserves to lower rising gasoline prices as Americans go into the holiday season, Senate Majority Leader Chuck Schumer said on Sunday and Reuters reported.

“We’re here today because we need immediate relief at the gas pump and the place to look is the Strategic Petroleum Reserve,” Schumer, a Democrat, said at a news conference in New York.

As the U.S. economy reawakens after the coronavirus pandemic, supply and demand cannot keep up, especially with supply chain disruptions, Schumer said.

“No industry is spared. But fuel gasoline is the worst of all,” Schumer said. “Let’s get the price of gas down right now. And this will do it.”

Parts of Europe, China Bring Back COVID-19 Lockdowns

Europe is the epicenter of the COVID-19 pandemic again, prompting some governments to consider re-imposing unpopular lockdowns. Austria has one of the continent’s highest infection rates, with a seven-day incidence of 815 per 100,000 people.

In Germany, the federal government and leaders of Germany’s 16 states are due to meet next week to discuss tightening measures.

Other Bearish News

U.S. energy firms last week added oil rigs for a third week in a row with crude prices hovering a seven-year high, prompting some drillers to return to the wellpad. The oil rig count is an early indicator of future output.

Additionally, OPEC last week cut its world oil demand forecast for the fourth quarter by 330,000 barrels per day (bpd) from last month’s forecast.

Daily Forecast

The bearish news is piling up and traders don’t seem to be in a hurry to stop the price slide. Without a sizable bid, prices are likely to continue to retreat over the short-term.

The threat of a release from the Strategic Petroleum Reserve (SPR) is helping to weigh on prices, but traders still aren’t sure when President Biden will make his decision and how much will be released. Analysts have warned an SPR release would only produce a short-term effect in the market, as it would not increase U.S. production capacity.

If that’s a valid statement then we may have already seen the move in the market, which leads us to the possibility of a “sell the rumor, buy the fact” situation.