Oil Price Fundamental Daily Forecast – Rate Hike Fears, OPEC World Oil Demand Cut Weigh on Prices
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures closed nearly 1% lower on Friday, reversing the previous session’s gains on worries over a sooner-than-expected rate hike by the U.S. Federal Reserve.
On Friday, January WTI crude oil futures settled at $79.69, down $0.73 or -0.91% and January Brent crude oil finished at $82.17, down $0.70 or -0.85%.
Crude oil prices were also pressured by a strengthening U.S. Dollar and speculation that the Biden administration might release oil from the U.S. Strategic Petroleum Reserve (SPR) to push down prices.
Friday’s price action serves as a reminder that traditional supply and demand fundamentals aren’t the only factors driving the price action, but also Federal Reserve and government intervention.
Inflation, the Dollar, and the Federal Reserve…
The government reported last week that consumer inflation reached a 31-year high. This prompted investors to increase bets on a sooner-than-expected rate hike by the Federal Reserve. This made the U.S. Dollar a more attractive asset. The rising greenback then helped reduce foreign demand for dollar-denominated crude oil.
Traders Bracing for Release from U.S. Strategic Petroleum Reserve
U.S. President Joe Biden could take action as soon as this week to address soaring gasoline prices, Energy Secretary Jennifer Granholm said on Monday.
“He’s certainly looking at what options he has in the limited range of tools a president might have to address the cost of gasoline at the pump, because it is a global market,” Granholm told MSNBC in an interview.
“Hopefully there will be an announcement or so this week,” she added but did not give any details.
US Drillers Add Oil and Gas Rigs for Third Week in a Row – Baker Hughes
U.S. energy firms this week added oil and natural gas rigs for a third week in a row as oil prices rose to a near seven-year high, prompting some drillers to return to the wellpad.
The oil and gas rig count, an early indicator of future output, rose six to 556 in the week to November 12, its highest level since April 2020, energy services firm Baker Hughes Co said in its closely followed report on Friday. That puts the total rig count up 244 rigs, or 78%, over this time last year.
U.S. oil rigs rose four to 454 this week, their highest since April 2020, while gas rigs rose two to 102, their highest since September 2021
Short-Term Outlook
Last week, OPEC cut its world oil demand forecast for the fourth quarter by 330,000 barrels per day (bpd) from last month’s forecast as high energy prices hampered economic recovery from the COVID-19 pandemic.
At the same time, the Biden administration is calling on OPEC+ to increase output while at the same time readying to release more crude from the SPR into the economy.
Prices could be pressured by both events, but one slip up by OPEC+ could generate another surge in supply. This would occur if OPEC and its allies decide to cut back on its expected 400,000 barrel per day increase in production in December and January.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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