Oil Price Fundamental Daily Forecast – Spike in COVID-19 Cases Expected to Drag on Demand in US and Europe

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures finished marginally lower on Friday, pressure by concerns that a spike in COVID-19 cases in the United States and Europe will continue to drag on demand in two of the world’s biggest fuel-consuming regions.

On Friday, December WTI crude oil futures settled at $41.12, down $0.12 or -0.29% and December Brent crude oil closed at $42.93, down $0.23 or -0.54%.

New OPEC Supply/Demand Fears

OPEC+, a grouping of the Organization of the Petroleum Exporting Countries (OPEC) and allied producers including Russia, fear a prolonged second wave of the pandemic and a jump in Libyan output could push the oil market into surplus next year, according to a confidential document seen by Reuters, a much gloomier outlook than just a month ago.

A panel of officials from OPEC+, called the Joint Technical Committee, discussed their worst-case scenario during a virtual monthly meeting on Thursday. That involved commercial inventories form major world consumers remaining higher than the five-year average in 2021, rather than falling below that mark.

US Oil and Gas Rig Count Rises By Most Since January

U.S. energy firms this week added the most oil and natural gas rigs since January as producers return to the wellpad with crude prices holding around $40 a barrel over the past several months, Reuters reported.

The oil and gas rig count, an early indicator of future output, rose for the fifth week in a row, increasing 13 to 282 in the week to October 16, energy services firm Baker Hughes Co said in its closely followed report on Friday.

The total rig count fell to a record low of 244 rigs during the week-ended August 14, while oil rigs alone fell to a 15-year low at 172 in the same week, according to Baker Hughes data going back to 1940.

U.S. oil rigs this week also posted their biggest build since January, rising 12 to 205 this week, their highest since June. Gas rigs rose one to 74, according to Baker Hughes data.

Speculators Trim Net Long Crude Futures and Options Positions

Money managers cut their net long U.S. crude futures and option positions by 9,442 contracts to 288,454 in the week to October 13, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Short-Term Outlook

The key takeaway from Friday is that the active spread of the pandemic across Europe and North American is likely to curtail the oil demand recovery and could lead to another round of demand destruction.

For a look at all of today’s economic events, check out our economic calendar.