Oil Price Fundamental Daily Forecast – Supported by Positive Russian Comments, Rate Cut Expectations

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Monday after reversing earlier losses. The positive turnaround in the market is being fueled by hopes of deeper production cuts by OPEC and its allies, and stimulus from the major central banks. Both news headlines are helping to offset concerns about damage to demand from the coronavirus outbreak.

At 16:09 GMT, April WTI crude oil is trading $46.01, up $1.24 or +2.82% and May Brent crude oil is at $50.84, up $1.17 or +2.36%.

OPEC February Oil Output Sinks on Libyan Unrest, Cuts

OPEC oil output dropped in February to the lowest in over a decade as Libyan supply collapsed due to a blockade of ports and oilfields and Saudi Arabia and other Gulf members over delivered on a new production-limiting accord, a Reuter’s survey found.

On average, the 13-member Organization of the Petroleum Exporting Countries pumped 27.84 million barrels per day (bpd) last month, according to the survey, down 510,000 bpd from January’s figure.

Putin Says Russia Can Handle Oil Slide but Hints at OPEC Cooperation

Russian President Vladimir Putin said that Russia can cope with the recent decline in oil prices as the coronavirus has spread internationally but offered a chink of light to OPEC as the producer group pushes for deeper supply cuts.

Moscow has been resisting further curbs, arguing that reduced output by OPEC and its allies, known as OPEC+, will not necessarily revive demand, sources said.

“I want to stress that for the Russian budget, for our economy, the current oil prices level is acceptable,” Putin told a meeting with Russian energy officials and producers to discuss the coronavirus and its implications.

He added, however, that this does not set aside the need for action, “including together with foreign partners”.

Meanwhile, Russian Energy Minister Alexander Novak said on Monday that Moscow is evaluating the smaller oil production cut proposal made by OPEC+, adding it had not received a proposal for deeper cuts.

Daily Forecast

It looks like the comments from Russians Putin and Novak were enough to trigger a short-covering rally. They may be enough to underpin the market until the OPEC+ decision on production cuts later this week.

If OPEC+, including Russian go along with the additional output cut of 600,000 bpd then look for the short-covering rally to extend. However, gains will be limited until factory activity in China increases and the spread of coronavirus slows down.

If OPEC+ does nothing then oil prices could collapse to under $40.00 per barrel.