Oil Price Fundamental Daily Forecast – Vaccine Rollouts Boosting Demand Optimism as Brent Nears $60 Level

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures rose to their highest levels in nearly a year on Friday with Brent traders zeroing in on the psychological $60 a barrel level on economic revival hopes led by strong compliance with the planned output cuts by OPEC+.

Also contributing to the gains were another drawdown in U.S. stockpiles, a rise in new orders for U.S.-made goods, which indicates continued strength in manufacturing and hopes for the passage of President Joe Biden’s COVID-19 relief plan.

At 13:04 GMT, March WTI crude oil is trading $56.74, up $0.51 or +0.91% and April Brent crude oil is at $59.43, up $0.59 or +1.00%.

The rollout of COVID-19 vaccines is fueling hopes of lockdowns being eased, boosting fuel demand. But even demand optimists such as OPEC do not expect oil consumption to return to pre-pandemic levels in 2021. Nonetheless, this did not stop OPEC+ will following through on its pledge to continue its planned output cuts into March.

For about nine months, oil has gained support from supply curbs by major producers. OPEC and its allies, collectively known as OPEC+, stuck to their supply tightening policy at meeting on Wednesday. Record OPEC+ cuts have helped to lift prices from historic lows last year.

Further boosting the market, a weekly supply report showed a drop in U.S. crude inventories to their lowest since March, suggesting that output cuts by OPEC+ producers are having the desired effect.

OPEC+ Sticks with Oil Policy as Prices Rise Towards One-Year High

OPEC+ maintained its oil output policy at a meeting on Wednesday, a sign producers are happy that their deep supply cuts are draining inventories despite an uncertain outlook for a recovery in demand as the pandemic lingers.

US Crude Stockpiles Fall, Gasoline Inventories Surge:  EIA

U.S. crude oil stockpiles fell while gasoline inventories jumped unexpectedly, the Energy Information Administration said on Wednesday.

Crude inventories fell by 994,000 barrels in the week to January 29 to 475.7 million barrels, their lowest since March. Analysts in a Reuters poll had forecast a 446,000-barrel rise.

U.S. gasoline stocks rose by 4.5 million barrels in the week to 252.2 million barrels, compared with analysts’ expectations for a 1.1 million-barrel rise.

Distillate stockpiles, which include diesel and heating oil, fell by 9,000 barrels in the week to 162.8 million barrels.

Daily Forecast

Other than profit-taking ahead of the weekend, it’s hard to find a reason long investors would abandon their positions, given the improving fundamentals. A weak non-farm payrolls report could also encourage some liquidation. But it would have to take a dramatic shift in the optimism over the COVID-19 vaccine rollout to truly derail the current rally.

For a look at all of today’s economic events, check out our economic calendar.