Oil Price Fundamental Daily Forecast – China Demand Concerns, Worries Over New Supply Put Bears in Control

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply lower on Monday as sellers pounded the market in reaction to weak economic data out of China. Sellers are also being driven by worries over Iran’s response to a nuclear deal proposal which could raise the country’s oil exports.

The market was under pressure from the start of the session after pipelines shut down last Thursday were placed back online over the weekend. The news that Aramco stands ready to boost crude output also pressured prices.

At 10:26 GMT, October WTI crude oil futures are trading $87.34, down $4.12 or -4.50% and December Brent crude oil futures are at $91.67, down $4.11 or -4.29%. On Friday, the United States Oil Fund ETF (USO) settled at $74.97, down $1.31 or -1.72%.

Gloomy Refinery Numbers from China Indicate Lower Demand

China’s refinery crude throughput fell last month to its lowest since March 2020 as several state refiners underwent unplanned shutdowns and their independent peers trimmed production in response to thinning markets, Reuters reported.

Refiners processed 53.21 million tonnes of crude oil in July, 8.8% less than a year earlier, according to data from the National Bureau of Statistics (NBS).

That is equivalent of 12.53 million barrels per day (bpd), the lowest daily rate since March 2020, and compared with 13.37 million bpd in June.

Traders Bracing for Iran Nuclear Agreement Decision

Traders are taking no chances on Monday and selling crude oil futures ahead of Iran’s decision to accept or reject the latest proposal from the European Union to revive the 2015 nuclear deal. An acceptance of the terms of the agreement would remove sanctions on Iranian oil exports, leading to an increase in global supply.

Iran could respond as early as later today, said Iranian Foreign Minister Hossein Amirabdollahian, while calling on the United States to show flexibility to resolve three remaining issues to save a 2015 nuclear pact.

Daily Forecast

October WTI crude oil and December Brent are both in a position to test major support areas at $88.26 to $81.85 and $90.95 to $85.25, respectively. Trader reaction to these areas could determine the near-term direction of prices.

Meanwhile prices could continue to drop throughout the week after Saudi Aramco said it is ready to ramp up output. The company stands ready to raise crude oil output to its maximum capacity of 12 million barrels per day (bpd) if requested to do so by the Saudi Arabian government, Chief Executive Amin Nasser told reporters on Sunday.

Given the worries over demand from China and the possible increase in supply from Iran and Aramco, the bears are clearly in control at this time.