Oil Price Fundamental Daily Forecast – Hard to Find a Reason to Be Long Over the Weekend

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed on Friday, however, momentum is clearly to the downside as traders continue to worry about the coronavirus’ impact on global demand. Both futures contracts are in a position to post their fourth consecutive weekly loss.

Early in the session, the markets were boosted by comments from the World Health Organization (WHO) that seemed to calm tensions. On Thursday, the WHO declared the coronavirus a global emergency, but calmed the markets by opposing travel restrictions. It also said Chinese actions so far will “reverse the tide” of the spread and that it declared the emergency to help those countries with weak health systems.

At 14:33 GMT, March WTI crude oil is trading $51.73, down $0.41 or -0.81% and April Brent crude oil is at $56.57, down $0.77 or -1.26%.

Oil prices were also underpinned by reports that Saudi Arabia has opened a discussion about moving an upcoming policy meeting to early February from March to address the impact of coronavirus on crude demand.

Perhaps putting a lid on prices was a report showing China manufacturing came in line with expectations. It wasn’t the actual report that capped the market, but the thought that it did not reflect current conditions in the country.

Growth in China’s factory activity faltered in January, an official survey showed, as export orders fell and an outbreak of a new virus added to risks facing the world’s second-largest economy, Reuters reported.

The Purchasing Managers’ Index (PMI) fell to 50.0 in January from 50.2 in December, China’s National Bureau of Statistics (NBS) said on Friday. The reading was in line with analysts’ forecasts and hit the neutral 50-point mark that separates growth from contraction on a monthly basis.

While the PMI showed activity in some parts of the sector holding up, economists are doubtful the survey provides a meaningful read on the economy given recent developments with the coronavirus and distortions from the Lunar New Year break.

“I would disregard today’s release,” said Raymond Yeung, Chief Economist for Greater China at ANZ, in an email to Reuters.

“The figure certainly overrates the economic outlook as it does not reflect the interruption due to the outbreak,” he said.

Daily Forecast

With the coronavirus spreading, it’s going to be hard for traders to carry speculative long positions over the weekend, so I anticipate selling pressure throughout the day as traders increase bearish bets on conditions worsening.