Oil Price Fundamental Daily Forecast – Worries Over Trade Deal, Deeper OPEC Cuts Weighing on Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Friday on renewed concerns over U.S.-China trade relations and soaring U.S. crude oil inventories.

Despite progress in the trade talks between the two economic powerhouses over the past month, traders are concerned over whether, and when, the United States and China will agree on a long-awaited deal to end their bitter trade dispute.

At 11:27 GMT, December WTI crude oil is trading $56.10, down $1.05 or -1.80% and January Brent crude oil is at $61.15, down $1.14 or -1.83%.

Concerns over Trade Deal

On Thursday, China and the U.S. announced they would rollback tariffs. This temporarily raised the chances of a near-term deal, sending crude oil prices higher. However, that move didn’t last.

Furthermore, the decision to rollback tariffs is causing some problems with Trump administration hardliners who fear the U.S. may lose its leverage against China if it continues to make concessions. Additionally, the two parties haven’t been able to determine a venue for the signing of a trade deal, meaning a November signing date has now been pushed into December.

Rising Supply Issues

Crude oil was also pressured by the news that U.S. stockpiles rose 7.9 million barrels the week-ending November 1 as refiners cut output and exports fell, the Energy Information Administration (EIA) said on Wednesday. Traders were looking for an increase of 1.5 million barrels.

Helping to ease the pressure on prices was the news that gasoline and distillate inventories dropped 2.8 million barrels and by 622,000 barrels respectively.

Stocks at the Cushing, Oklahoma, delivery hub for WTI rose by 1.7 million barrels, the EIA said.

Doubts over Potential OPEC Production Cuts

Weeks ago, OPEC and its allies suggested that deeper production cuts could be coming in an effort to offset the impact of falling demand. However, this week’s remarks from an OPEC official are casting doubts on whether the cartel and its friends will have to cut output.

OPEC Secretary-General Mohammad Barkindo said this week that he was more optimistic about the outlook for 2020 because of potentially positive developments on trade disputes, appearing to downplay any need to cut output more deeply.

Daily Forecast

Crude oil prices are likely to remain under pressure on Friday as the general uncertainty in the marketplace over a trade deal and additional output cuts from OPEC is encouraging investors to book profits and lighten up on the long side.

The selling pressure is likely to continue over the near-term until there is a breakthrough in trade deal negotiations. A further increase in U.S. supply will help accelerate the selling pressure.