Oil Price Fundamental Daily Forecast – Rapid Turnaround Fueled by OPEC+ Output Expectations

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are up more than 2% on Thursday following a dramatic reversal to the upside. The catalysts behind the market’s strength are expectations that OPEC and its allies will continue to slow output increases.

The recovery came as a surprise with traders facing headwinds from yesterday’s U.S. government inventories report that showed another build in crude oil stocks and calls to OPEC from the U.S. and other large importers to bump up production.

At 12:29 GMT, December WTI crude oil is trading $82.29, up $1.43 or +1.77% and January Brent crude oil is at $83.73, up $1.74 or +2.12%.

OPEC+ Likely to Stick to Oil Output Plan Sources Tell Reuters

OPEC and its allies are likely to stick to plans to raise oil output by 400,000 barrels per day (bpd) at an OPEC+ meeting on Thursday, sources said, despite calls from the United States for extra supply to cool rising prices.

Top OPEC producer Saudi Arabia has already dismissed calls for more oil supplies from OPEC and allies. Kuwait and Iraq also support the current plans.

The virtual talks on Thursday start with a meeting of the Joint Ministerial Monitoring Committee, followed by the decision-making meeting of all OPEC+ ministers scheduled for 1400 GMT.

A Russian source told Reuters he expected OPEC+ to stick with the current plan.

US Crude Stockpiles Rise, While Gasoline Draws to Four-Year Low – EIA

U.S. crude oil stockpiles rose more than expected, but gasoline inventories dwindled to a four-year low on steady demand, the Energy Information Administration (EIA) said on Wednesday.

Crude inventories rose by 3.3 million barrels in the week to October 29 to 434.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.2 million-barrel rise.

U.S. gasoline stocks fell by 1.5 million barrels in the week to 214.3 million barrels, the EIA said, putting those inventories at their lowest levels since November of 2017.

Daily Forecast

The rapid turnaround in prices once again proves the market is being well-supported by the fundamentals. OPEC+ is currently under producing with the global economy recovering quickly. However, they are likely to continue to stick with their plans because producers are concerned about going too fast, fearing renewed setbacks in the battle against the COVID-19 pandemic.

OPEC+ is also not likely to cave to pressure from the U.S. It feels that the United States has plenty of capacity to raise production itself if it wants to help the world speed up the economic recovery.