Oil Price Fundamental Daily Forecast –Lackluster Trade, but Markets Still Higher for Week

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower Friday on profit-taking ahead of the week-end and next week’s Christmas holiday. Nonetheless, the markets are in a position to finish higher for a third consecutive week on the back of an improving outlook for global demand growth.

At 12:21 GMT, February WTI crude oil futures are trading $60.87, down $0.31 or -0.51% and February Brent crude oil is at $66.25, down $0.29 or -0.44%.

More Optimism over Trade Deal

Prices have been lifted since last Friday’s announcement of a trade deal between the United States and China raised hopes for increased demand growth. On Thursday, China announced a list of import tariff exemptions for six oil and chemical products from the United States. This news helped boost optimism.

Furthermore, sentiment received a boost when Treasury Secretary Steven Mnuchin said Thursday that he had no doubt trade negotiators representing the U.S. and China would sign their so-called “phase one” trade deal in early January.

Other factors underpinning prices this week were a draw down in U.S. inventories and lingering optimism over OPEC’s decision to trim production in an effort to stabilize prices.

U.S. Energy Information Administration Weekly Inventories Report

On Wednesday, the EIA reported that U.S. crude supplies fell by 1.1 million barrels for the week-ending December 13. Traders were looking for a decrease of 1.5 to 2.5 million barrels during the period.

OPEC and Allies Agree to Deeper Production Cuts

Two weeks ago, OPEC and other non-OPEC producers such as Russia agreed to deepen production cuts by a further 500,000 barrels per day (bpd) from January 1 on top of previous reductions of 1.2 million barrels per day.

Daily Forecast

“The energy sector as a whole looks to set to end 2019 with a solid year-on-year gain. This is due solely to the oil market,” Barbara Lambrecht, analyst at Commerzbank, said.

Brent is 23% more expensive than it was at the start of the year. Oil prices fell almost 20% in 2018.

Meanwhile, UBS lifted its oil price forecast for 2020, but also predicts the market will be oversupplied by 0.3 million barrels per day next year.

Finally, a weekly drilling report by energy services firm Baker Hughes is due on Friday. The expected decline should provide some support for oil prices.