Oil Price Fundamental Daily Forecast – WTI Trend Changed to Up, Focus Shifts to OPEC Meeting

U.S. West Texas Intermediate and international benchmark Brent crude oil futures spiked higher early Monday after the United States and China agreed to a 90-day truce in their trade war over the week-end at the G20 summit in Argentina. Traders are also reacting to expectations that OPEC and its allies will agree to production cuts at its meeting in Vienna on December 6-7.

At 0846 GMT, January WTI crude oil futures are trading $53.38, up $2.45 or +4.81% and February Brent crude oil is at $62.08, up $2.62 or +4.44%.

U.S. WTI was further supported by an announcement from Canada that Alberta province will force producers to cut output by 8.7 percent, or 325,000 barrels per day (bpd), to deal with a pipeline bottleneck that has led to crude building up in storage. According to Reuters, most of Alberta’s oil is exported to the United States. One analyst called the move “an unprecedented step to ease a crisis in the Canadian energy industry.”

To recap the event from over the week-end, the United States and China agreed not to impose additional trade tariffs for at least 90 days while the economic powerhouses hold talks to resolve existing trade disputes.

In other news, Qatar announced plans to pull out of OPEC. Speaking at a news conference, Qatar’s Energy Minister Saad al-Kaabi said the country would withdraw from OPEC on January 1, 2019, ending a membership which has stood for more than half-a-century.

The country’s energy minister said Monday that the move represents a “technical and strategic” change, Reuters reported, and was not politically motivated.

Forecast

At this time, the momentary truce between the United States and China is a positive for crude oil prices. However, investors are going to continue to monitor the progress of the trade talks. Morgan Stanley said it saw a “slight upside in our 2019 growth outlook” because of the renewed talks.

The focus now shifts to a meeting by OPEC on December 6. At the meeting, the cartel, along with non-OPEC member Russia, is expected to announce cuts aimed at stabilizing prices and reining in production. Traders are expecting a reduction of 1 million-1.4 million bpd.

The dollar is also expected to weaken because of the U.S.-China truce and last week’s dovish comments from Fed Chair Jerome Powell. This could also lead to increased foreign demand for dollar-denominated crude oil.

The WTI trend changed to up on the daily chart earlier today. If the upside momentum continues then we could see another spike to the upside over $55.50.