Oil Price Fundamental Daily Forecast – Optimism Over China’s Easing of COVID Curbs Offset by OPEC+ Uncertainty
Mixed fundamentals are helping to push U.S. West Texas Intermediate and international-benchmark Brent crude oil futures lower on Thursday. Uncertainty ahead of Sunday’s OPEC+ meeting is being blamed for the selling although losses are being limited by easing COVID restrictions in China.
At 06:49 GMT, January WTI crude oil futures are trading $80.14, down $0.41 or -0.51% and February Brent crude oil is at $86.41, down $0.56 or -0.64%. On Wednesday, the United States Oil Fund ETF (USO) settled at $70.21, up $1.87 or +2.74%.
Other potentially bullish factors are a tight U.S. supply situation and a weaker U.S. Dollar. The wildcard that traders are watching is the European sanctions on Russian oil. I think there is uncertainty over how it is going to work. This could only add to the volatility of a thinly traded market.
OPEC+ to Meet Virtually
OPEC+ is scheduled to meet virtually on Dec. 4. Earlier in the week, there were rumors that the group was considering cutting output due to expectations of lower demand and the lack of clarity over the impact of the looming Russian oil-price cap on the market.
However, traders now feel that since the meeting is being held virtually, there is very little chance of a major policy change. If they do make a surprise cut then look for a volatile spike to the upside.
China Eases Zero-COVID Strategy
Optimism over Chinese oil demand recovery was lifted on Wednesday when the cities of Guangzhou and Chongqing announced the easing of COVID curbs. This took place a day after demonstrators in southern Guangzhou clashed with police amid a string of protests against the world’s toughest coronavirus restrictions.
US Crude Stockpiles Plunge as Output Climbs to Highest Since March 2020
Crude inventories fell by 12.6 million barrels in the week to Nov. 25 to 419.1 million barrels, the Energy Information Administration said on Wednesday, compared with expectations in a Reuters poll for a 2.8 million-barrel drop.
The drop was attributed to refiners who continued to boost activity to counter low U.S. inventories headed into the winter heating season.
The early price action suggests uncertainty and impending volatility. Traders seem to be waiting for a catalyst. The next catalyst could be more easing of COVID curbs by China, a surprise output cut from OPEC+ or clarity over the impact of the cap on Russian oil. A steep drop by the U.S. Dollar could also be considered a bullish catalyst.
The bullish factors seem to be adding up but buyers appear to be reluctant to take an aggressive position in front of the OPEC+ decision.