Oil Price Fundamental Daily Forecast – Light Short-Covering Ahead of Weekend

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher shortly after the regular session opening. Helping to underpin prices on Friday is the news that some producers like Kuwait said they would move to cut output swiftly to try to counter the demand destruction for fuels caused by the coronavirus pandemic.

At 13:23 GMT, June WTI crude oil futures are trading $17.26, up $0.76 or +4.61% and June Brent crude oil is at $21.95, up $0.62 or +2.91%.

OPEC+ Production Cuts Update

Under a deal agreed between OPEC and its major allies, production cuts equal to 9.7 million barrels of oil per day are due to kick in from May 1.

However, Kuwait’s state news agency KUNA said on Thursday the producer will begin cutting supplies to international markets without waiting for the official start of the OPEC+ deal.

Additionally, Azerbaijan’s Azeri-Chirag-Guneshli oil project will have to cut output sharply from May onwards as the oil producer fulfills its commitments under the deal to cut production, four sources told Reuters.

Russia Slashes May Crude Oil Exports from Sea Ports Before OPEC+ Scheduled Cuts

Russian oil companies will cut their crude oil loadings from Baltic ports and Black Sea’s Novorossiisk in May to 5.42 million tonnes, the lowest level in 20 years, the preliminary loading schedule seen by Reuters showed on Friday.

Russia, which has joined an OPEC+ pact to curb oil supplies, has agreed to cut its output by 8.5 million bpd starting on May 1, from a baseline of 11 million bpd.

Russian oil companies are preparing the biggest output cuts ever, which may lead to permanent shutdown of some oilfields and will cause significant costs.

On a daily basis, Russia will cut oil exports from Baltic ports and Novorossiisk by 43% compared to April, Reuters calculations show.

As the cuts are the most significant ever attempted by Moscow, Urals exports are set to fall to their lowest since at least the early 2000s, Refintiv Eikon data shows.

Daily Forecast

Barring any steep jump the rest of the session on Friday, prices are heading for their eighth weekly loss in the last nine, one of the most tumultuous weeks in the history of oil trading, with U.S. West Texas Intermediate falling into negative territory to minus $37.63 a barrel on Monday, while Brent fell to a two-decade low.

Traders are saying the late week rally is being fueled by short-covering rather than speculative buying. Nothing has really changed in the fundamentals to turn the energy complex bullish the last three days. Once the coronavirus is under control, output should rebound, but don’t expect it to return to its pre-virus path for years.