Oil Price Fundamental Daily Forecast – Pressured by Keystone Pipeline Restart

U.S. West Texas Intermediate and international-favored Brent crude oil futures are trading lower on Tuesday. The catalyst behind the early weakness is uncertainty over a possible extension of production cuts by an OPEC-led group of major producers and expectations of higher supply as the Keystone pipeline restarts delivery of crude oil from Canada to the U.S. futures hub in Cushing, Oklahoma.

At 0830 GMT, January WTI crude oil is trading $57.66, down $0.44 or -0.76% and February Brent crude oil is at $63.22, down $0.16 or -0.25%.

Forecast

Crude oil prices are expected to continue to retreat as speculators who bought the Keystone pipeline news last week take profits on expectations of higher supply as the Keystone pipeline restarts.

WTI crude oil prices jumped to their highest level since mid-2015 late last week, fuelled by the outage of the Keystone pipeline, one of Canada’s main crude export routes to the United States.

TransCanada is now saying that it would restart the 590,000 barrel-per-day pipeline at reduced pressure later on Tuesday after getting approval from U.S. regulators.

Also adding to the selling pressure is uncertainty over Russia’s participation in the extension of production cuts beyond March 2018. Members of OPEC and other key producers, including Russia, will meet on November 30 to discuss whether to continue with the cuts after they agreed last January to withhold 1.8 million bpd of output.

WTI crude oil was trading at about $57.00 before the pipeline shutdown last week so the market could break back to this price as the TransCanada pipeline resumes delivery.

Both WTI and Brent crude oil could plunge sharply if Russia doesn’t go along with the extension, or if OPEC decides not to move forward with the extension.