Oil Price Fundamental Daily Forecast – Underpinned by Stronger Equity Markets

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Monday. There weren’t any major news events this week-end and the markets are closed on Tuesday so investors are using the stock market for guidance. Crude oil is being underpinned by a strong performance in the equity futures markets shortly before the cash market opening.

At 1344 GMT, February WTI crude oil is trading $46.02, up $0.69 or 1.52%. March Brent crude oil is at $54.17, up $0.96 or 1.80%.

Traders are saying the crude oil and stock markets are being support today by hints of progress on a possible U.S.-China trade deal, with U.S. President Donald Trump saying he had a “very good call” with Chinese President Xi Jinping, helped bolster sentiment for oil.

Trump also tweeted that negotiations were “moving along very well” toward a comprehensive deal, while Chinese state media said Xi believed both sides wanted “stable progress.” Xi said ties had reached a “vital stage” on the 40^th anniversary of the U.S.’s establishment of formal ties with China and the world expected the two sides to work together, according to the official Xinhua News Agency.

Forecast

At the start of the new year, the focus will be on the OPEC-led production cuts. The group has pledged to cut 1.2 million barrels of crude oil per day starting January 1. However, they are not expected to have an impact on the oil glut for several weeks.

Also down the road is the possible ending of the extensions of the Iran waivers which are set to expire sometime in May. This is expected to remove more supply from the market. Some blame the imposition of the waivers for starting the bear market in crude oil.

Analysts have a somewhat bearish outlook for crude oil in 2019. However, some say this may change with the imposition of the 1.2 million barrel per day output cut, but rising U.S. production is still expected to be a bearish factor weighing on prices. Last year, U.S. output hit 11.6 million barrels per day.