Oil Price Fundamental Daily Forecast –Prices Steady Despite Demand Recovery, Rising Supply Concerns

James Hyerczyk
·3-min read

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading nearly flat on Friday, while heading for their first weekly losses in three. Prices are getting hit this week on both the demand and supply sides, led respectively by surging coronavirus cases in the United States and Europe, and Libyan output increases.

At 09:25 GMT, December WTI crude oil is at $40.66, up $0.02 or +0.05%  and December Brent crude oil is at $42.54, up $0.08 or +0.19%.

COVID-19 Update – Euro Zone Business Activity Shrinks

Several U.S. states reported record daily increases in infections on Thursday, raising concerns about future fuel demand, while France extended curfews for about two-thirds of its population as the second wave of the pandemic sweeps across Europe.

In related news, economic activity in the Euro Zone shrunk in October as coronavirus restrictions returned to the region, preliminary data showed on Friday.

The flash Euro Zone PMI Composite Output Index, which looks at activity in both manufacturing and services sectors, dropped to a four-month low in October to 49.4, versus 50.4 in September. A reading below 50 represents a contraction in activity.

The latest figures showed that manufacturing has remained somewhat resilient over the last month, but activity in services has fallen to a five-month low.

The latest numbers coincided with a period of new restrictions across the Euro Zone as it grapples with a second wave of coronavirus infections.

Libyan Output on the Rise

Libyan output, which had been mostly offline since January due to unrest, has reached 500,000 barrels per day (bpd) and will rise further by the end of October.

“After years of setbacks and false starts, Libya is back in the oil game. A stalemate between the armed forces battling to control the OPEC nation has led to an uneasy truce, and most fields and ports shuttered amid the fighting are operating once again,” Bloomberg wrote.

“A blockade of many of the country’s energy facilities ended last month, and the state energy firm National Oil Corp. is ramping up production faster than many analysts expected. Output reached 560,000 barrels a day on Wednesday, a person with knowledge of the matter said, up from 150,000 in September,” Bloomberg reported.

Analysts at Bloomberg Intelligence see overall production reaching 1 million barrels a day by year-end.

Daily Forecast

We’re expecting more sideways price action and would be surprised by a substantial price surge, given the second wave of the pandemic, the slowdown in demand recovery, rising Libyan output and the chances of a production increase in January 2021.

The wildcards on Friday will be the announcement of a fiscal stimulus deal and the Baker Hughes rig count. Traders will also be watching the Flash U.S. Manufacturing and Services PMI reports for any indications of growth.

More stimulus could give prices a short-lived boost along with a surprise cut in the number of operating rigs.

This article was originally posted on FX Empire