Oil Price Fundamental Daily Forecast – Lockdowns, Restrictions Offsetting Vaccine, Stimulus Hopes

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Tuesday as COVID cases and lockdowns outweigh vaccination news. After posting a loss on Monday, traders are extending the move after California tightened its pandemic lockdown through Christmas and coronavirus cases surged in the United States and Europe.

At 13:43 GMT, January WTI crude oil is trading $45.44, down $0.32 or -0.70% and February Brent crude oil is at $48.58, down $0.21 or -0.43%.

While the main focus is on falling future demand, there was a technical bounce overnight after the world’s first fully-tested COVID-19 vaccine shot was administered to a grandmother in Britain. However, this news wasn’t strong enough to trigger a rebound rally as traders continued to worry about the sharp rise in coronavirus cases globally and the string of renewed lockdowns and the implementation of strict measures in California, Germany and South Korea.

Additionally, France may have to delay unwinding some lockdown restrictions next week, government sources said, after signs the downward trend in new cases had flattened after shops were allowed to reopen late last month.

Mixed Reaction to Stimulus Package

Although analysts are keeping an eye on U.S. lawmakers’ efforts to approve a new economic stimulus package needed to drive jobs growth and energy demand, the reaction by traders suggest a little disappointment in the size of the proposed deal.

Furthermore, the package seems to be a little heavy on the relief side with very little stimulus being offered. For example, this new plan does not contain a $1,200 check for most Americans like the first proposal earlier in the year. Without cash stimulus, gasoline demand could be under pressure, keeping a lid on crude oil prices.

Daily Forecast

Last week’s OPEC+ decision is likely to keep a floor in the market, but it cannot control demand. Given this development, we’re likely to see a rangebound trade over the near-term until there is some data to support that the vaccines are working to slow the spread of the pandemic.

“As supply expectations are now firmer after the OPEC+ meeting, at least for January, prices are not expected to deviate much for a while and swings will be focused on ‘lighter’ market events, even if these are mostly of psychological value – such as the first vaccinations in the UK, said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

Data due from the American Petroleum Institute on Tuesday and from the U.S. government on Wednesday is expected to show that U.S. crude stocks fell last week while refined product stockpiles rose, according to estimates from five analysts polled by Reuters.