Oil Price Fundamental Daily Forecast – Worries Over Increasing U.S. Production, Russia Weighing on Prices

U.S. West Texas Intermediate and Brent crude oil futures finished higher on Friday, capping off a week of solid gains. The catalysts behind the rally were the shutting down of the Keystone pipeline in reaction to a leak on November 17 and optimism that OPEC will extend the deal to cut production from the March 2018 deadline to December 18.

January WTI crude oil settled at $58.95, up $0.93 or +1.60% and February Brent crude oil finished at $63.47, up $0.48 or +0.76%.

Forecast

Oil prices are under pressure early Monday, but still hovering near two-year highs on worries over increased U.S. production, however, the markets remain underpinned by optimism that the OPEC-led supply cuts will be extended.

Uncertainty over the length of the Keystone pipeline shutdown is also providing support.

At 0923 GMT, WTI crude is trading $58.57, down $0.38 or -0.64% and Brent is at $63.33, down $0.14 or -0.22%.

On the bearish side, U.S. production is up 15 percent mid-2016 to 9.66 million barrels per day (bpd), bringing close to levels achieved by Russia and Saudi Arabia. Drilling activity is expected to increase along with output.

Last week, oil services firm Baker Hughes said U.S. energy companies added oil rigs, with the monthly rig count rising for the first time since July to 747 active rigs.

On the bullish side, the closure of the Keystone pipeline that connects Canada’s oil sand fields with the United States following a spill, has resulted in a drop of 590,000 bpd. This is expected to reduce U.S. oil stocks.

The markets could trade sideways to lower for a couple of days until the OPEC meeting on November 30 as investors pare positions due to lingering uncertainty over Russia’s participation in the production-cut extensions.

There is plenty of room for disappointment later this week if the OPEC decision falls short of expectations. According to the Commodity Futures Trading Commission, hedge funds and money managers have built a massive net-long speculative position on oil futures.