Oil Price Fundamental Weekly Forecast – OPEC+ Supply Cuts, Stimulus Hopes Continue to Set Bullish Tone

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures hit their highest levels in nearly a year last week with Brent traders eyeing the psychological $60 a barrel level way ahead of schedule.

During the week-ending February 5, March WTI crude oil settled at $56.85, up $4.65 or 8.91% and April Brent crude oil closed at $59.34, up $4.30 or +7.25%.

Last week’s rally was fueled by an economic revival led by strong compliance with the planned output cuts by OPEC+, another government report showing a draw in crude stockpiles, optimism over a faster U.S. economic recovery on the back of fresh stimulus from Washington and a successful rollout of the U.S. vaccination program.

OPEC+ Maintains Policy to Tighten Supply

OPEC+ maintained its oil output policy at a meeting last Wednesday, a sign producers are happy that their deep supply cuts are draining inventories despite an uncertain outlook for a recovery in demand as the pandemic lingers.

US Energy Information Administration Weekly Inventories Report

U.S. crude oil stockpiles fell while gasoline inventories jumped unexpectedly, the Energy Information Administration (EIA) said on Wednesday. Distillate stockpiles, which include diesel and heating oil, declined.

In other news, crude stocks at the Cushing, Oklahoma, delivery hub for U.S. futures fell by 1.5 million barrels in the last week. Refinery crude runs fell by 80,000 barrels per day last week, as utilization rates rose by 0.6 percentage points to 82.3% of capacity, the EIA said.

Speculators Turn More Positive About Economic Recovery

The outlook for the economy has improved recently as progress in coronavirus vaccinations, moves by U.S. President Joe Biden to pass more fiscal stimulus, and improving economic data is encouraging aggressive speculators to add to their already established bullish positions.

The crude oil market showed little reaction to Friday’s disappointing U.S. jobs report, suggesting speculators are looking forward and not behind to a strengthening U.S. economy and demand outlook.

Weekly Forecast

It’s hard to find any news bearish enough to derail the rally. Profit-taking due to valuation issues could help put in a short-term top, but it looks like it is going to take a failure in the vaccine rollout or another surge in coronavirus cases to bring this rally to a screeching halt over the near-term. Traders also look like they have adjusted to the possibility of a stronger U.S. Dollar, which tends to weigh on demand for dollar-denominated crude oil.