Oil Price Fundamental Daily Forecast – Underpinned by Trade Deal Optimism, API Supply Worries Capping Gains

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on low volume on Tuesday. The markets are being supported by the hopes of a trade deal between the United States and China.

Helping to keep a lid on prices is general uncertainty ahead to this afternoon’s American Petroleum Institute (API) weekly inventories report and Wednesday’s report from the U.S. Energy Information Administration (EIA).

At 09:14 GMT, January WTI crude oil is at $57.82, down $0.19 or -0.32%, and January Brent crude oil is at $63.49, down $0.16 or -0.25%.

After posting a dramatic reversal to the upside late last week, the price action has stagnated, suggesting investors are waiting for bullish news that could take it to levels not seen since mid-September.

Trade Deal Update

Analysts are saying WTI and Brent are being underpinned by comments from the United States and China that kept alive hopes that the two economic powerhouses would soon agree to a deal that would end their trade war.

According to reports, top trade negotiators from China and the United States held a phone call on Tuesday morning, China’s Commerce Ministry said, as the two sides try to hammer out a preliminary “phase one” deal in a trade war that has dragged on for 16 months.

China and the United States are “moving closer to agreeing” on a “phase one” trade deal, the Global Times – a tabloid run by the Chinese Communist Party’s official People’s Daily- reported earlier.

OPEC+ Update

On the supply side, traders continue to expect OPEC and its allies, including Russia to agree to reduce output to support prices at their December 5-6 meeting. The broader producer group is widely expected to extend its 1.2 million-barrel-per-day supply cut to the middle of 2020.

Many traders feel that the group would have probably increased their output cuts had the U.S. and China not made progress in their trade talks. Analysts at J.P. Morgan believe the cuts may be extended until the end of 2020.

API Report

The API will report weekly inventory at 21:30 GMT. The report is expected to show crude oil stockpiles declined by 300,000 barrels during the week-ending November 21. It would be the first decline in five weeks if confirmed.

Last week, the API reported a build of 5.943 million barrels for the week-ending November 14. However, the EIA reported a build of only 1.4 million barrels.

Daily Forecast

Low pre-holiday volume could lead to a mostly sideways trade. Due to the thin-trading conditions, we could see an exaggerated reaction to the API report, especially if it misses expectations.