Oil Price Fundamental Daily Forecast – Light Short-Covering Ahead of NFP Report

Today, all eyes will be on the U.S. Non-Farm Payrolls report. Analysts are saying the report is likely to show hiring is slowing, but it should be solid enough to quell talk of a recession.
James Hyerczyk
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Friday in a technically related move following a more than two week sell-off. Some technicians are calling the markets oversold after a relentless 13 session sell-off.

Some traders are saying sellers lightened up on the short side as the markets approached their August bottoms. Nonetheless, the fundamentals are bearish and the markets are not in a position to change the trend to up at this time.

At 09:58 GMT, November WTI crude oil is trading $52.65, up $0.20 or +0.38%. December Brent crude oil is at $58.14, up $0.43 or +0.75%.

Despite Friday’s mild turnaround, the markets remain on track for large weekly losses on fears that a global economic slowdown will hurt demand. This week’s price action clearly shows that supply issues took a backseat to demand worries.

Contributing to the weakness this week were increasing worries over lower demand due to a global economic slowdown. These concerns have been elevated this week because of weaker-than-expected U.S. economic data. At the start of the week, oil traders were expressing confidence in the U.S. economy, but are now worried that the slowing global economy has reached the U.S. shores.

Also contributing to the weakness was a larger-than-expected build in U.S. crude inventories according to a government report on Wednesday. This surprise news drove prices sharply lower because it followed a report from the American Petroleum Institute (API) on Tuesday that showed an unexpected drawdown.

Prices were also pressured by the news that Saudi Aramco has restored full oil production and capacity to the levels they were at before attacks on its facilities on September 14.

Daily Forecast

Traders are clearly focusing on the potential impact of a weakening global economy on global demand growth.

On Thursday, weak U.S. services sector data added to worries about global oil demand and exacerbated fears that a protracted U.S.-China trade war could put the global economy into recession.

Today, all eyes will be on the U.S. Non-Farm Payrolls report. Analysts are saying the report is likely to show hiring is slowing, but it should be solid enough to quell talk of a recession.

We could see late session short-covering ahead of the week-end as some traders may choose to take protection against geopolitical events in the Middle East.

Furthermore, optimistic traders may decide to lighten up on the short side or take speculative long positions ahead of the start of U.S.-China trade talks on October 10-11.

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