Oil Price Fundamental Daily Forecast – WTI, Brent Stabilize Ahead of Monday’s OPEC+ Production Decision

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures edged higher on Friday on expectations that OPEC and its allies will discuss production cuts at its monthly meeting on September 5. Gains were capped, however, on concerns over China’s COVID-19 curbs and weakness in the global economy tied to rising interest rates.

On Friday, October WTI crude oil settled at $86.87, up $0.26 or +0.30% and December Brent crude oil finished at $91.81, up $0.49 or +0.54%. Additionally, the United States Oil Fund ETF (USO) closed at $71.44, up $0.49 or +0.69%.

OPEC+ To Weigh Rollover or Cut at Sept. 5 Meeting, Sources Say

OPEC+ is likely to keep oil output quotas unchanged for October at a meeting on Monday, three OPEC+ sources told Reuters, although some sources would not rule out a production cut to bolster prices that have slid from sky-high levels hit earlier this year in March.

The Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, meets as demand faces headwinds and supply could be boosted by returning Iranian crude if Tehran secures a deal with world powers on its nuclear work, Reuters reported.

Traders Still Dwelling on Bearish Saudi Output Cut Remarks

WTI and Brent crude are still hovering near a lows reached on August 22 the day OPEC’s leader Saudi Arabia said OPEC stands ready to cut output to correct a recent oil price decline driven by poor futures market liquidity and macro-economic fears, which has ignored extremely tight physical crude supply.

Saudi state news agency SPA cited Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman as telling Bloomberg OPEC+ has the means and flexibility to deal with challenges.

Prince Abdulaziz was quoted as saying the oil futures market has fallen into “a self-perpetuating vicious circle of very thin liquidity and extreme volatility”, making the cost of hedging and managing risks for market participants prohibitive.

He also was quoted as saying prices were falling based on “unsubstantiated” information about demand destruction and confusion around sanctions, embargoes and price caps, which have been proposed by the United States on Russian oil.

Prince Abdulaziz added, “Without sufficient liquidity, markets can’t reflect the realities of the physical fundamentals in a meaningful way and can give a false sense of security at times when spare capacity is severely limited and the risk of severe disruptions remains high,” he said.

Short-Term Outlook

Although most traders expect OPEC+ to keep output quotas as current levels, some could follow the advice of Prince Abdulaziz and agree to cut production slightly. Furthermore, some members may want to make a pre-emptive move in case Iran agrees to a nuclear deal, which would bring more oil to the market.