Oil Price Fundamental Daily Forecast – US Producers Being Forced to Make Aggressive Production Cuts

U.S. West Texas Intermediate and Brent crude oil futures are edging higher on Friday shortly before the regular session opening. U.S. crude is trading inside yesterday’s range, while Brent is inching above yesterday’s high.

The markets are being underpinned by optimism over President Donald Trump’s plans to ease the U.S. coronavirus lockdown that could help to jump start the American economy. Gains are being capped by China’s worst quarterly economic contraction on record.

At 10:53 GMT, June WTI crude oil is trading $26.02, up $0.49 or +1.92% and June Brent crude oil is at $28.58, up $0.76 or +2.73%.

Traders said the U.S. futures contract is also be weighed down by the imminent expiration of the May contract, and the rapidly-filling crude storage tanks. Traders are also in no hurry to buy crude with limit facilities to store it, and as refinery runs continue to be reduced tremendously.

Trump’s Re-Opening Plan and Promising COVID-19 Drug Results Raise Hopes

President Donald Trump laid out new guidelines on Thursday for U.S. states to emerge from a coronavirus shutdown in a staggered, three-stage approach meant to revive the U.S. economy even as the country continues to fight the pandemic.

The recommendations call on states to show a “downward trajectory” of COVID-19 cases or positive tests for the disease over 14 days before proceeding with the plan, which gradually loosens restrictions on businesses that have been shuttered to blunt the spread of the virus.

Stocks Jump after Drug Shows Effectiveness in Treating the Coronavirus

European and US stock futures jumped in overnight trading stateside following a report that said a Gilead Sciences drug was showing effectiveness in treating the coronavirus.

Gilead Sciences shares popped by more than 16% in after-hours trading Thursday after details leaked of a closely watched clinical trial of the company’s antiviral drug Remdesivir, showing what appears to be promising results in treating COVID-19.

China’s First-Quarter GDP Plunges

China’s first-quarter GDP shrank 6.8% in 2020 as compared to a year ago, according to data from the National Bureau of Statistics of China. That was the first quarterly decline since 1992, when official quarterly GDP reports started, according to Reuters. Analysts polled by Reuters had expected China’s GDP to have fallen 6.5% from last year, a sharp drop from the 6% growth recorded in the fourth quarter of 2019.

Retail sales also fell more than expected in March, but industrial output only dipped slightly, suggesting its manufacturing sector at least is recovering more quickly.

Daily Forecast

Other than a periodic short-covering rally due to oversold technical conditions, crude oil is going to have a hard time rallying unless there is a major reduction in the number of coronavirus cases. Furthermore, traders want to see meaningful production cuts from outside the OPEC+ group. Eventually, market forces are going to force producers to cut back.