Oil Price Fundamental Daily Forecast – Demand Growth Worries, Rising Supply Weighing on Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Wednesday, pressured by comments from President Trump on U.S.-China trade relations, which renewed concerns over demand growth and a bearish weekly inventories report from the American Petroleum Institute (API). Just a week ago, traders were expressing concerns over supply following an attack on Saudi oil facilities.

At 09:32 GMT, November WTI crude oil is trading $56.52, down $0.77 or -1.34%. December Brent crude oil is at $61.18, down $0.94 or -1.51%.

Trump Won’t Accept “Bad Deal” With China

This week’s selling pressure actually began on Tuesday after President Trump said he will not accept a “bad deal” in trade talks with China.

Speaking to the United Nations General Assembly in New York, Trump struck an optimistic tone about reaching agreements with Beijing and other major trading partners. He also slammed China for what he called unfair trade practices, while downplaying the importance of quickly striking a deal to end the prolonged trade dispute.

“Hopefully we can reach an agreement that will be beneficial for both countries. But as I have made very clear I will not accept a bad deal for the American people,” Trump said, prompting no reaction from the Chinese delegation watching.

American Petroleum Institute Weekly Inventories Report

Late Tuesday, the API reported a surprise build of 1.38 million barrels for the week-ending September 19, compared to analyst expectations of a 768,000-barrel draw.

After Tuesday’s report, the net draw for the year is 23.93 million barrels for the 39-week reporting period so far, according to API data.

The API report also showed a build of 1.9 million barrels of gasoline for the week-ending September 19. Traders were looking for a build in gasoline inventories of 296,000 barrels for the week.

Distillate inventories fell by 2.2 million barrels for the week, while inventories at Cushing rose by 2.3 million barrels.

Daily Forecast

Given yesterday’s reaction to Trump’s comments about trade, crude oil could trade sideways to lower over the near-term unless there are positive developments from the high-level U.S.-China trade talks, which are scheduled to start in about two weeks.

The sources of continued volatility are likely to be Middle East tensions between the United States and Iran, and Saudi Arabia and Iran.

Traders are also monitoring the progress of the repairs to the Saudi oil facilities. The Saudi’s claim the job is about 75 percent completed. Currently, it is supplying its customers with inventory. The fear is Saudi’s crude oil stockpiles could run out within two months. In other words, there is limited storage capacity.

If the facilities can’t be repaired in a timely manner, buyers may have to look for supplies in the spot market and this could drive prices higher again.