Oil Price Fundamental Daily Forecast – Increased OPEC+ Supply, China Recovery Slowdown Weighing on Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Tuesday shortly after the New York opening as OPEC and its allied prepared for a meeting on Wednesday amid calls from the Biden Administration to pump more crude. Meanwhile, Brent remains well-supported as it continues to hold above the psychological $70 level.

At 12:15 GMT, October WTI crude oil is trading $68.41, down $0.80 or -1.16% and November Brent crude oil is at $71.47, down $0.76 or +1.02%%.

Other bearish factors leaning on prices early Tuesday include concerns that power outages and flooding in Louisiana after Hurricane Ida will cut crude demand from refineries, and signs of a slowing recovery in China amid weaker manufacturing data.

Despite the current seven day rally, both WTI and Brent crude oil are on pace to post their first monthly loss since March. Nonetheless, they both remain within striking distance of their July highs, when Brent rose to its highest level since 2018 and WTI since 2014.

Hurricane Impact Still Being Felt

Energy companies are continuing their days-long evaluation of facilities hit by Hurricane Ida as widespread power outages and flooding presented major hurdles to restarting oil and gas processing plants.

Hurricane Ida knocked out at least 94% of the offshore Gulf of Mexico oil and gas production and caused “catastrophic” damage to Louisiana’s grid.

The loss of power could last three weeks, utilities officials said, slowing efforts to repair and restart energy facilities, which could also take at least two weeks to fully resume operations. Power outages at processing plants could cost owners millions of dollars in lost production.

China’s Economy Under Pressure as Factory Activity Slows in August, Services Contract

Also weighing on prices early Tuesday was a report that showed China’s businesses and the broader economy came under increasing pressure in August as factory activity expanded at a slower pace while the services sector slumped into contraction, raising the likelihood of more near-term policy support to boost growth.

OPEC+ Meets to Discuss Fuel Demand and Higher Production

OPEC and its allies are scheduled to meet on September 1 to discuss future demand in reaction to the global surge in COVID-19 cases. The group known as OPEC+ will also discuss whether it is appropriate to add the agreed upon 400,000 barrels per day to their supply each month through December

Daily Forecast

The American Petroleum Institute (API) is scheduled to release its inventories data for the week-ending August 27, but since it is old data, it’s not likely to be too relevant given the impact of Hurricane Ida.

WTI and Brent could see some volatility today as traders become more aware of the damage to production facilities by the Hurricane.