Oil Price Fundamental Daily Forecast – Breakdown Continues as Traders Dwell on Rising Supply, Falling Demand

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower at the mid-session. Despite renewed optimism over U.S.-China trade relations, which could lead to higher demand, traders are reacting to the stronger U.S. Dollar, which tends to lower foreign demand for dollar-denominated crude oil. Rising supply is also a concern as Saudi Arabia continues to make improvements to its damaged infrastructure.

At 16:13 GMT, November WTI crude oil is trading $55.27, down $0.64 or -1.16% and December Brent crude oil is at $60.28, down $0.76 or -1.26%.

China at Forefront

China is at the forefront on Monday as we approach the start of renewed trade talks on October 10 -11.

While stock market traders remain optimistic about U.S.-China trade relations, crude oil traders don’t seem so positive. This may be because stock traders are discounting future events, and the end of the trade war would be a bullish event.

Meanwhile, crude oil traders are not so optimistic, while facing a wall of declining demand.

Additionally, comments on the stock market page of the news are saying the market is up because China’s official Purchasing Managers’ Index (PMI) rose to 49.8 in September, slightly better than expected and advancing from 49.5 in August.

Crude oil traders are dwelling on the negative side of the report saying, factory activity remains below the 50-point mark that separates expansion from contraction on a monthly basis, according to data from the National Bureau of Statistics showed. This is keeping a lid on prices and exerting pressure.

Saudi’s Infrastructure Repairs

According to Reuters, top oil exporter Saudi Arabia has restored capacity to 11.3 million barrels per day after an attack on its processing facilities on September 14. However, sources also said that Saudi Aramco has yet to confirm its operations have been restored fully.

Daily Forecast

The price action suggests crude oil traders are trying to build a support base, but need some bullish news to turn the markets around. At this time, the news has been mostly negative about lower demand and rising supply.

Additionally, money managers cut their net long U.S. crude futures and options positions in the week to September 24, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

The markets are back to pre-Saudi Arabia attack levels so the risk premium has been eliminated. Traders are now likely to continue to monitor traditional supply/demand numbers.

If an attack on Saudi production facilities couldn’t produce a prolonged bull market then we’re not likely to see a meaningful rally unless a trade deal is announced.