Oil Price Fundamental Daily Forecast – Facing Biggest Weekly Drop Since June on Dreary Demand

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Friday, with prices headed for their biggest weekly declines since June, as weak demand and ample fuel supplies offset potential support from a weaker U.S. Dollar.

After hovering near five-month highs throughout August on the hope of a robust recovery in the economy, prices began to collapse at mid-week following a report that the volume of crude arriving in China was set to slow in September and after U.S. government data showed a steep drop in gasoline demand.

At 06:58 GMT, October WTI crude oil futures are trading $40.99, down $0.38 or -0.92% and December Brent crude oil is at $44.19, down $0.40 or -0.90%.

End of China’s Crude Oil Buying Splurge May Dent Demand Optimism

Refinitiv said August-loading barrels destined for China were 7.93 million bpd, down from 8.2 million bpd in July and well down from the second quarter average of 11.87 million bpd.

What the new data seems to be showing is that the crude oil that has been flooding to China in recent months will probably ease back to more normal levels from October onwards.

While this still means imports of likely above 10 million bpd, it does mean the crude market is going to lose as much as 2 million bpd of demand that it had been getting used to.

Why is this going to happen? Because earlier in the year when oil prices were falling to 22-year lows, Chinese refiners took advantage of their financial muscle to suck up available barrels across the globe. Now that its economy is sputtering like the rest of world, China isn’t interested in aggressively buying crude since they have ample supply.

Oil Prices Pressured as US Data Feeds Fuel Demand Worry

Oil prices took a hit on Thursday and is vulnerable to further downside pressure today after a weekly government report highlighted weak U.S. gasoline demand data.

On Wednesday, the U.S. Energy Information Administration (EIA) data showed domestic gasoline demand during the week-ending August 28 fell to 8.78 million barrels per day (bpd) from 9.16 million bpd a week earlier. Consumption of other products also fell.

Daily Forecast

The early price action suggests the markets are vulnerable to further downside action, but that traders may be waiting for the results of the U.S. Non-Farm report at 12:30 GMT, just in case they offer a glimmer of hope for increased demand. However, based on the conviction of the sellers on Thursday, it going to take some robust numbers to turn the market around.

Furthermore, even expectations of a weaker U.S. Dollar aren’t helping to increase foreign demand for U.S. oil since there is just too much flowing around.