Oil Price Fundamental Daily Forecast – Short-Covering Rally Fueled by Hope of Output Deal

U.S. West Texas Intermediate and international-benchmark crude oil futures are trading higher on Friday on increased expectations of a production cut by OPEC and other major producers known as OPEC+.

The markets are following through to the upside following record gains on Thursday after U.S. President Donald Trump said he had brokered a deal that could result in Russia and Saudi Arabia cutting output by 10 million to 15 million barrels per day (bpd), representing 10-15% of global supply. Trump also said he made no offer to cut U.S. output.

According to Reuters, the source added that OPEC+ is watching the outcome of a meeting between Trump and the oil companies later on Friday and that a final figure on cuts depends on participation by all oil producers.

At 11:46 GMT, May WTI crude oil futures are trading $26.45, up $1.13 or +4.46% and June Brent crude oil is at $32.65, up $2.71 or +9.05%.

Saudi’s Call for Emergency Meeting

Saudi Arabia called on Thursday for an emergency meeting of OPEC and non-OPEC oil producers, saying it aimed to reach a fair agreement to stabilize oil markets.

Members Support Meeting Suggestion

Kuwait’s oil minister Khaled al-Fadhel said on Friday he supported Saudi Arabia’s invitation for a meeting between OPEC and non-OPEC oil producers.

The energy ministry of non-OPEC producer Azerbaijan, meanwhile, said the OPEC+ meeting is planned for April 6 and will be held as a video conference, Russia’s RIA news agency reported.

Daily Forecast

Traders are probably asking what a 10 to 15 million barrel per day production cut would do to oil prices. The June Brent daily chart indicates a minimum rally to $41.00 and a maximum move to $45.38. May WTI crude oil could reach $36.70 and maybe $41.29.

The major issue here is with demand. Reducing supply will certainly help prices, but probably not enough to fill the price gaps from early March.

Weak shorts are covering their positions, but there isn’t any strong evidence of traders flipping to the long side.

Meanwhile, UBS analysts said they were skeptical that producers can credibly commit to large cuts and expected oil prices to come under pressure again.