Oil Price Fundamental Daily Forecast – Demand Concerns Growing
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher after two days of selling pressure driven by the plunge in the global equity markets. Traders also said that worries over supply were also an overreaction. Nonetheless, the markets are likely to post weekly losses.
At 0805 GMT, December WTI crude oil is trading $71.59, up $0.75 or +1.07% and January Brent crude oil is at $80.67, up $0.80 or +1.00%.
The selling this week has been harsh with WTI hitting its lowest level since September 21. It’s also on-track to post a 4.2 percent decline. The weekly loss will also be its first in five weeks.
Brent hit its lowest level since September 24 on Thursday. It’s also down 4.2 percent this week. It will also be the first weekly decline in five.
Hurricane Michael’s Impact
According to the Bureau of Safety and Environmental Enforcement, U.S. producers operating in the Gulf of Mexico cut output by 40 percent on Thursday due to Hurricane Michael. Some operators have begun returning crews to their offshore platforms.
The Bureau added that the lost production adds up to about 630,107 barrels per day.
Demand Concerns
OPEC cut its forecast of global demand growth for oil next year for a third straight month, citing headwinds facing the broader economy from trade disputes and volatile emerging markets.
OPEC also said it sees the oil market as well supplied and is wary of creating a glut next year, the group’s secretary-general said on Thursday.
EIA Inventories Report
According to the U.S. Energy Information Administration (EIA), U.S. commercial crude oil inventories rose 6 million barrels the week-ending October 5. Investors were looking for a build of about 2.3 million barrels.
Gasoline inventories rose 1 million barrels during the week-ending October 5. Distillate inventories declined 2.7 million barrels during the same period.
The EIA also said refineries last week operated at 88.8 percent of capacity, processing 16.2 million bpd of crude and producing 9.7 million bpd of gasoline and 5 million bpd of distillate.
Forecast
WTI crude oil tested a key support zone at $71.61 to $70.40 on Thursday. The early price action on Friday suggests buyers are coming in to support prices. A trade through $71.61 will give the market an upside bias.
Brent hit a low of $79.45, well above its key target zone at $78.73 to $76.95.
While we could see a technical bounce to the upside, gains could be limited over demand concerns. Early Friday, the International Energy Agency (IEA) said, “Our position is that expensive energy is back … And it poses a threat to economic growth.” Slow growth equals lower demand.
This article was originally posted on FX Empire
