Oil Price Fundamental Daily Forecast – Choppy Trade Expected as US-China Hammer Out Details of Trade Deal

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Tuesday, after clawing back most of its early session losses. The catalyst behind the second day of weakness is worry over U.S.-China trade relations that is raising concerns over the weakening global economy and declining demand growth.

At 11:55 GMT, December WTI crude oil is at $53.29, down $0.36 or -0.68% and December Brent crude oil is at $59.04, down $0.31 or -0.56%.

Weak data from China is also pressuring prices. Earlier on Tuesday, the National Bureau of Statistics (NBS) reported that China’s factory gate prices declined at the fastest pace in more than three years in September. That follows customs data on Monday that showed Chinese imports had contracted for a fifth straight month.

On Friday, the announcement of a partial trade deal between the United States and China helped boost prices, but these gains were erased on Monday when China said it wanted to continue discussions before agreeing to the first phase of the deal. This news rekindled concerns over demand ground.

However, the market did get a slight boost on Tuesday after OPEC Secretary-General Mohammad Barkindo said OPEC and its allies “will do whatever (is) in its power” to sustain oil market stability beyond 2020.

Rising tensions in the Middle East are also providing some support on concerns over a possible support disruption after President Trump imposed sanctions on Turkey and demanded the NATO ally stop a military incursion in northeast Syria that is rapidly reshaping the battlefield of the world’s deadliest ongoing war.

According to CNBC, the move highlights increasing instability in the Middle East amid months of attacks on tankers and oil sites in and around the oil-exporting Gulf region.

Daily Forecast

It seems U.S.-China trade relations will be the main focus for traders for several weeks or until the two economic powerhouses sign the “Phase One” trade agreement. So expect a volatile two-sided trade.

Short-term investors will be watching U.S. inventories. Prices could get a boost this week as investors are expecting a drawdown in crude inventories in the United States.

This week’s American Petroleum Institute (API) and U.S. Energy Information Administration (EIA) inventories reports are expected to show a slight draw down.