Oil Price Fundamental Daily Forecast – Coronavirus-Related Demand Worries Likely to Cap Gains

U.S. West Texas Intermediate and international benchmark crude oil futures are trading lower on Monday but attempting to claw back earlier losses. Oil prices fell earlier in the session as new coronavirus infections hit China, Japan and the United States, adding to concerns that a resurgence of the virus could weigh on the recovery of fuel demand.

At 10:01 GMT, August WTI crude oil futures are trading $35.96, down $0.55 or -1.51% and August Brent crude oil is at $38.50, down $0.23 or -0.59%.

Prices began to rebound after China reported crude oil throughput in May rose 8.2% from a year earlier as independent refiners increased their processing to meet the recovery in fuel demand following the easing of coronavirus lockdowns.

Renewed COVID-19 Outbreaks Could Weigh on Fuel Demand Recovery

Shortly after the opening, crude oil fell more than 2% as new coronavirus infections hit China and the United States, raising the prospect that renewed outbreaks of the virus could weigh on the recovery of fuel demand.

A cluster of infections in Beijing has increased concern of a resurgence of the disease. Over the weekend, more than 25,000 new U.S. cases were reported on Saturday alone as more states reported record new infections and hospitalizations.

“The recovery in oil demand is already set to be a lengthy process, and a fresh wave of cases will certainly raise worries that a recovery in demand may take even longer than initially thought,” ING Economics said in a note.

Industrial Output in China Rises

China’s industrial output expanded 4.4% in May from a year earlier but the gain was less than expected, official data showed on Monday, suggesting the economy is still struggling to get back on track after the coronavirus crisis.

Analysts polled by Reuters had expected growth to quicken slightly to 5.0% from a year earlier as more businesses resumed production, following a rise of 3.9% in April, the first expansion since the virus emerged from China late last year.

Still, Chinese refineries’ throughput in May rose by 8.2% from the same period a year earlier to about 13.6 million barrels per day (bpd).

“Overall, with oil supply flowing in a more or less expected path, demand will now be the key price mover,” said Rystad Energy’s head of oil markets Bjornar Tonhaugen.

Daily Forecast

The early price action suggests a choppy, two-sided trade ahead unless the stock market takes another hard hit. In that case, crude oil is likely to retest today’s intraday lows.

Although an OPEC-led monitoring panel will meet on Thursday to discuss ongoing record production cuts and see whether countries have delivered their share of the reductions, the focus is likely to remain on demand.

Traders will also be monitoring the global coronavirus numbers. Another surge in COVID-19 cases could lead to the enforcement of restrictions that could contribute to further demand destruction.

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