Oil Price Fundamental Daily Forecast – Traders Watching US Manufacturing PMI, US-Iran Nuclear Deal TalksIran and the U.S are in talks to revive a nuclear deal which could lead to a lifting of U.S. sanctions that would allow Iran to ramp up oil exports.
U.S. WTI West Texas Intermediate and international-benchmark Brent crude oil futures are trading slightly lower while putting in a mixed performance on Monday.
Prices are being pressured on concerns that a catastrophic second wave of a coronavirus epidemic in India cut short a recovery in oil demand in the country, offsetting optimism about a rebound in consumption in developed countries and China in the second half of the year, Reuters reported.
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Fuel Sales Drop in India
State-level restrictions aimed at stemming infections in India have led to lower fuel sales in the world’s third largest consumer in April, preliminary data shows. According to a report, overall fuel demand is down by about 7% from the April 2019 pre-COVID level after nearly reaching this level in March.
Elsewhere Vaccination Progress Expected to Lift Demand
Outside of India, Japan, Brazil and now Argentina, the rollout of vaccination campaigns is expected to lift oil demand, especially in the Euro Zone, which is finally making progress after a dismal first quarter, prompting analysts to increase their forecasts for Brent prices for a fifth straight month, a Reuters poll showed.
OPEC Pumped More Oil as Expected, US Production Down in February
On the supply side, the Organization of the Petroleum Exporting Countries pumped 25.17 million bpd in April, up 100,000 barrels from March, as Iran and other producers increased output. OPEC’s production has risen every month since June 2020 with the exception of February.
In the United States, crude oil production dropped by over a million barrels per day in February, to the lowest levels since October 2017, according to a monthly government report on Friday.
There is nothing in the news particularly bullish on Monday so gains could be capped and prices could actually fall if conditions in India escalate.
According to Reuters, India’s COVID-19 total cases are nudging close to 20 million and analysts are expecting a sharper slump in the country’s demand for transportation fuels in May due to more restrictions.
Furthermore, on Sunday, a leading Indian industry body urged authorities to curtail economic activity, as the nation’s healthcare system was overwhelmed by the spiraling infections.
Also on the bearish side, Iran and the United States are in talks to revive a nuclear deal which could lead to a lifting of U.S. sanctions that would allow Iran to ramp up oil exports. Additionally, in the Unites States, energy firms added oil and natural gas rigs last week, leading to a ninth straight monthly rig count increase, as a recovery in prices lured some drillers back to the wellpad, according to Baker Hughes.
Finally, traders will be watching the ISM Manufacturing PMI. It is expected to come in at 65.0, up from 64.7. A much better than expected number could be supportive for crude oil prices.