U.S. crude prices continue to dip lower. On Wednesday, WTI is trading at $53.37, down $0.67, or 1.25%. Brent crude is trading at $58.32, down $0.88, or 1.49%.
EIA Surplus Could Send Crude Lower
U.S. crude prices continue to head south this week. Crude has not posted a winning daily session since September 23. As well, the spectacular gains (12.8%) after the attack on a Saudi Arabian oil refinery have been erased. The downward trend could continue on Wednesday, as the Energy Information Administration (EIA) has forecast a surplus of 2.0 million barrels. The previous two readings showed a surplus in stockpiles and another surplus will weigh on crude prices. There was a surprising development on Tuesday, as the American Petroleum Institute (API) reported a large drawdown of 5.9 million barrels. However, the reading failed to stem the downward movement of U.S. crude prices.
Slowdown in U.S.,China Could Spell Trouble
The U.S. and China are the world’s largest consumers of crude, and with both economies experiencing a slowdown, crude prices could continue to fall. The U.S. economy grew by just 2.0% in Q2, compared to growth of 3.1% in the first quarter. In China, the economy has been hampered by the trade war with the U.S., and the manufacturing sector has been in contraction mode as exports have fallen off. Weak global economic conditions have also reduced demand for crude, and the lack of appetite for crude could result in prices continuing to decline. One key reason that oil prices have not fallen below the $50 level is geopolitical instability, in particular in the Persian Gulf. The recent attack on a Saudi oil refinery triggered double-digit gains for crude, and exposed the vulnerability of oil supplies. A breakout of hostilities involving Iran and its neighbors could boost sagging oil prices.
This article was originally posted on FX Empire
More From FXEMPIRE:
- S&P 500 Price Forecast – Stock markets get hit early on Wednesday
- Price of Gold Fundamental Daily Forecast – After Weak Manufacturing Data, ADP is Report to Watch
- GBP/JPY Price Forecast – British pound continues to drift lower
- Weak Data Slams Stocks, Johnson-Backed Brexit Deal To Be Rejected, U.S./China Trade Talks Are Next Week
- E-mini S&P 500 Index (ES) Futures Technical Analysis – Strengthens Over 2921.50, Weakens Under 2915.00
- AUD/USD and NZD/USD Fundamental Daily Forecast – Fed Rate Cut Means RBA, RBNZ Will Cut Further