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Oil Price Fundamental Daily Forecast – China Demand Concerns Capping Gains

By:
James Hyerczyk
Published: Jan 25, 2021, 12:58 UTC

Worries about lockdowns and restrictions are casting a pall over demand prospects globally and especially in China.

WTI and Brent Crude Oil

In this article:

U.S. West Texas intermediate and international-benchmark Brent crude oil futures are trading flat shortly before the regular session opening on Monday. Gains were being capped by renewed COVID-19 lockdowns that raised fresh concerns about global fuel demand, while the markets remained underpinned by vaccine hopes and OPEC+ production cuts.

At 12:41 GMT, March WTI crude oil is trading $52.34, up $0.07 or +0.13% and March Brent crude oil is at $55.52, up $0.11 or +0.20%. Both futures contracts are trading inside Friday’s range which suggests investor indecision and impending volatility.

Rising COVID Cases Casting Pall Over Demand

Developments around COVID-19 are likely to be watched by investors, as the world races to adapt against the mutating coronavirus which has produced a number of potentially more infectious variants.

Globally, more than 99 million people have been infected by COVID-19 and at least 2,127,206 lives have been taken, according to data compiled by Johns Hopkins University.

Since Friday there has been one negative COVID-19 news story after another including President Biden’s forecast calling for U.S. deaths to rise over 500,000 in a month or two.

Hong Kong locked down an area of the Kowloon peninsula on Saturday, the first such measure the city has taken since the pandemic began while some countries including Mexico recorded their highest daily case numbers.

Reports the new UK COVID variant was not only highly infectious but perhaps more deadly than the original strain also added worries.

Worries about lockdowns and restrictions are casting a pall over demand prospects globally and especially in China, the main pillar of strength for global oil consumption.

Renewed Supply Worries

On Friday, the U.S. Energy Information Administration reported domestic crude inventories surprisingly rose by 4.4 million barrels in the week to January 15, versus expectations for a draw of 1.2 million barrels.

Iran’s oil minister said on Friday the country’s oil exports have climbed in recent months and its sales of petroleum products to foreign buyers reached record highs despite U.S. sanctions.

Daily Forecast

Traders will be watching today to see if signs of weaker demand will weigh on the impact of additional stimulus from the U.S. government. Furthermore, traders are also paying close attention to the vaccine rollout as new issue arise over its distribution.

Throughout the week, however, the main price driver is likely to be China and whether the government can gain control of its current COVID-19 outbreak.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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