Oil Price Fundamental Daily Forecast – Baker Hughes Reports Weekly Decline of 33 U.S. Oil Rigs

U.S. West Texas Intermediate and international-benchmark Brent crude oil prices are edging higher on Friday, putting the markets on course for their second consecutive weekly gain. Needless to say, supply and demand are both driving the price action. From the supply side, traders are anticipating a slowdown as OPEC+ and other production cuts start to kick in. As for demand, it is expected to start improving with plans to relax economic and social restrictions.

At 17:10 GMT, June WTI crude oil is trading $23.94, up $0.39 or +1.66% and July Brent crude oil is at $30.29, up $0.83 or +2.82%.

Generally speaking, the crude oil market remains oversupplied, but OPEC, its allies and even North American oil companies are cutting production. OPEC+ has begun to implement their deal to trim 9.7 million barrels per day (bpd) from the start of May, and North American oil companies are cutting even faster to the tune of about 1.7 million bpd of output by the end of June.

On the demand side, the picture is also improving with Australia on Friday becoming the latest country to plan an easing of lockdown restrictions. France, parts of the United States and countries such as Pakistan are also planning to ease restrictions.

Also in the U.S., motorists are starting to take to the roads as the lockdowns ease. Gasoline supplied to the U.S. market rose to almost 6.7 million bpd last week according to the U.S. Energy Information Administration. Unfortunately, distillates rose, which means there is still a problem with on-road trucking and the airlines industry.

Finally, bullish traders seemed a little relieved on Friday after U.S. and Chinese officials discussed a trade deal agreed before the coronavirus outbreak, with both sides agreeing to implement the agreement.

Short-Term Outlook

In breaking news, Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil dropped by 33 to 292 this week. The oil rig count has now fallen for eight weeks in a row, implying upcoming declines in domestic crude output. The total active U.S. rig count, meanwhile, also fell by 34 to 374, according to Baker Hughes.

The rig count news is potentially bullish because it means U.S. production is going to continue to trend lower, however, the storage shortage is still an issue so continue to look for heightened volatility. Bullish traders are going to be zeroing in on demand, while bearish traders are going to be keeping their eyes on the excessive storage.