Oil Price Fundamental Daily Forecast – Bolstered by Big Jump in October Refinery Processing in China

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply higher shortly before the regular session opening on Monday. The rally is being fueled by new data showing a rebound in the world’s second and third largest economies, China and Japan.

The key story is out of China where a report showed refineries processed the most crude ever in October on a daily basis, while new lockdowns in the United States and Europe weighed on demand.

At 12:04 GMT, January WTI crude oil futures are trading $41.74, up $1.35 or +3.34% and January Brent crude oil futures are at $44.23, up $1.45 or +3.39%.

Bullish traders are hoping for a repeat of last week’s performance which saw both futures contracts gaining nearly 8%. The catalysts behind those gains were hopes for a vaccine for COVID-19 and that OPEC+ would maintain lower output next year to support prices.

OPEC and its allies, including Russia, have been cutting production by about 7.7 million barrels a day (bpd), with a compliance rate seen at 101% in October, and had planned to increase output by 2 million bpd from January 2021.

OPEC+ is set to hold a ministerial committee meeting on Tuesday that could recommend changes to production quotas when all the ministers meet on November 30 and December 1.

The group faces a challenge, however, in that Libya is now producing more than 1.2 bpd, and new restrictions in the United States and Europe could dampen the global demand recovery.

Daily Forecast

The news out of China is especially bullish and could actually support prices at current levels. But at the same time, the COVID-19 numbers are real and rising, which could lead to more lockdowns and restrictions in the U.S. and Europe, this adds up to a sideways trade. Although traders seem to be leaning toward the upper end of the trading range due to hopes for a vaccine and additional fiscal stimulus from the U.S. government.