Oil Price Fundamental Daily Forecast – Strong Demand Expected to Offset OPEC+ Production, Iran Supply Worries

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Wednesday, but hovering just below a 15-month high reached the previous session. The markets are trading inside yesterday’s range, which typically indicates investor indecision and impending volatility.

Strengthening demand expectations and a possible delay in the U.S.-Iran nuclear deal negotiations are helping to drive prices higher. Although OPEC and its allies have decided to stick with their plan to gradually increase output in June, traders embraced the news, indicating that it has likely been priced into the market since early April.

At 10:58 GMT, July WTI crude oil is trading $68.47, up $0.75 or +1.11% and August Brent crude oil is at $71.13, up $0.88 or +1.25%.

OPEC+ Agrees to Stick to Plan to Gradually Increase Supply Amid Strong Demand Expectations

OPEC and its allies, known as OPEC+, agreed on Tuesday to keep to their plan for a gradual easing of supply curbs through July. The move was widely expected by traders. According to reports, the meeting only took 20 minutes, which suggests the group has confidence in their forecasts calling for increased demand.

Saudi Energy Minister Prince Abdulaziz bin Salman said there has been solid demand recovery in the United States and China and he believes that the pace of COVID-19 vaccine rollouts can only lead to further rebalancing of the global oil market.

Possibility of New Iran Supply More Distraction than Issue

The slow progress of Iran nuclear talks is helping to ease some pressure on traders by allowing demand to catch up before fresh supply hits the market. Diplomats said the meeting will wrap up the latest round of talks and adjourn discussions for at least a week.

OPEC Secretary General Mohammad Barkindo also played down any potential disruption to the market, saying the group expected any return of Iranian exports to “occur in an orderly and transparent fashion” if and when a nuclear deal is reached, Reuters reported.

Daily Outlook

With the summer travel season starting in the United States and Europe, and the reopening economies, bullish traders expect the additional increases from OPEC+ and the possible Iranian return to the market to be easily absorbed by the rising demand.

Later today at 20:30 GMT, traders will have the opportunity to react to fresh weekly inventories numbers from the American Petroleum Institute (API). Early estimates show that traders are looking for a draw of about 1 million barrels of crude oil. However, the focus will be on the gasoline numbers. Traders are hoping for a big draw to boost prices.