Oil Price Fundamental Daily Forecast – Vulnerable to Rising Supply, COVID-19 Demand Destruction

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Wednesday on concerns that fuel demand will continue to falter as rising coronavirus cases across Europe and in the United States, the world’s biggest oil consumer, could impede economic growth. The issue about demand was also raised by comments from OPEC’s monthly report.

At 05:41 GMT, December WTI crude oil futures are trading $40.33, down $0.16 or -0.40% and December Brent crude oil is at $42.31, down $0.14 or +0.33%.

Rising European Coronavirus Cases Raise Demand Concerns

According to reports, Europe and the U.K. are likely to place new restrictions on economic activity to battle a second wave of coronavirus infections.

German Chancellor Angela Merkel said on Tuesday she was concerned by rising coronavirus cases across Europe.

“I am watching with great concern the renewed increase in infection numbers in almost every part of Europe. And I must say the situation continues to be serious, “Merkel said during a debate on the German presidency of the European Union at the bloc’s Committee of the Regions.

“We mustn’t throw away what we achieved via restrictions over the past months. These restrictions haven’t been easy for any of us,” she added. “Many have lost their lives. And that makes it all the more important that we make sure that a further lockdown won’t be needed.”

OPEC Cuts 2021 Oil Demand Forecast Again as Virus Cases Rise

World oil demand will rebound more slowly in 2021 than previously thought as coronavirus cases rise, OPEC said on Tuesday, adding to headwinds faced by the group and its allies in balancing the market.

Demand will rise by 6.54 million barrels per day (bpd) next year to 96.84 million bpd, the Organization of the Petroleum Exporting Countries said in a monthly report. The growth forecast is 80,000 bpd less than expected a month ago.

A further weakening of demand could threaten plans by OPEC and allies to taper in 2021 the record output cuts they made this year. OPEC is keeping an eye on the situation but currently has no plan to cancel the supply boost.

“We believe that this is the calculated volume to cater for the demand coming back,” United Arab Emirates Energy Minister Suhail al-Mazrouei told the Energy Intelligence Forum on Tuesday, referring to the 2021 output increase.

“While the 3Q20 recovery in some economies was impressive, the near-term trend remains fragile, amid a variety of ongoing uncertainties, especially the near-term trajectory of COVID-19,” OPEC’s report said on the economic outlook.

“As this uncertainty looms large, amid a globally strong rise in infections, it is not expected that the considerable recovery in 3A20 will continue into 4Q20 and in 2021.”

Daily Forecast

In other news from Tuesday that could potentially weigh on prices over the near-term, OPEC+ decided to stick to their plans to taper oil production cuts from January, Suhail al-Mazrouei, said.

Combine this news with the spread of coronavirus, and the fundamentals suggest crude oil is vulnerable to the downside.

U.S. crude oil inventories were seen falling last week, while distillate stockpiles likely declined for a fourth week, a preliminary Reuters poll showed on Tuesday.

The poll was conducted ahead of reports from the American Petroleum Institute (API) and the Energy Information Administration. Both reports were delayed by a day because of the Columbus Day holiday on Monday in the United States.

At 20:30 GMT, traders will get the opportunity to react to the API report.

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