Oil Price Fundamental Daily Forecast – China COVID Curbs Weigh; Losses Limited by Strong US GDP Data

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Friday, but still up for the week as top crude importer China widened its COVID-19 curbs. Nonetheless, the markets remained underpinned by supply concerns and surprisingly positive U.S. economic growth data.

At 11:15 GMT, December WTI crude oil futures are trading $88.44, down $0.64 or -0.72%. December Brent crude oil is at $96.48, down $0.48 or – 0.50%. On Thursday, the SPDR Gold Shares ETF (GLD) settled at $154.76, down $0.22 or -0.14%.

China Widens COVID-19 Curbs

Today’s gains were being fueled as Chinese cities ramped up COVID-19 curbs on Thursday, sealing up buildings and locking down districts in a scramble to halt widening outbreaks.

Chinese cities from Wuhan in central China to Xining in the northwest are doubling down on COVID-19 curbs, sealing up buildings, locking down districts and throwing millions into distress in a scramble to halt widening outbreaks.

China on Thursday reported a third straight day of more than 1,000 new COVID cases nationwide, a modest tally compared with the tens of thousands per day that sent Shanghai into a full-blown lockdown earlier this year but enough to trigger more restrictions across the country.

Crude oil traders feel the moves will weigh on demand.

IMF Cuts Asia’s Economic Forecasts as China’s Slowdown Bites

The International Monetary Fund cut Asia’s economic forecasts on Friday as global monetary tightening, rising inflation blamed on the war in Ukraine, and China’s sharp slowdown dampened the region’s recovery prospects.

The IMF expects China’s growth to slow to 3.2% this year, a 1.2 point downgrade from its April projection, after an 8.1% rise in 2021. The world’s second-largest economy is seen growing 4.4% next year and 4.5% in 2024, the IMF said.

Losses Limited by Strong Rebound in US Economic Growth

While worries about a drop in demand due to the COVID restrictions in China may be capping gains, crude oil is garnering some support from a report showing a strong rebound in U.S. gross domestic product (GDP) in the third quarter, highlighting the resilience of the world’s largest economy and oil consumer.

U.S. GDP increased at a higher than expected 2.6 annualized rate, Thursday’s data showed, after a 0.6% contraction in the previous quarter.

The German economy also grew unexpectedly in the third quarter, data showed on Friday, as Europe’s largest economy kept recession at bay for now despite high inflation and concerns over energy supply.

Short-Term Outlook

Despite today’s headwinds, crude oil is expected to be supported throughout November by the start of the OPEC+ output cuts. Meanwhile, a looming ban on Russian crude imports also supported prices.

“The market remains wary of the impending deadlines for European purchase of Russian crude before the sanctions kick in on December 5, “ANZ Research analysts said in a note.