Oil Price Fundamental Daily Forecast – OPEC-led Supply Cuts May Not Be Enough to Offset Demand Fears

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Wednesday amid renewed fears over the lingering trade dispute between the U.S. and China, which raised concerns over demand. President Trump, in his State of the Union address Tuesday night, failed to excite investors, and may have actually stoked the fears currently driving prices lower.

At 09:45 GMT, March WTI crude oil futures are trading $53.14, down $0.52 or -0.97% and April Brent crude oil is at $61.41, down $0.57 or -0.92%.

Trump continued to push for the building of the wall despite huge opposition from the Democrats. He said the border wall was needed to stem illegal immigration and smuggled drugs, but stopped short of declaring the issue a national emergency. In continuing to talk about building the wall, Trump raised concerns over the risk of another government shutdown.

Trump also offered little clarity over the on-going trade negotiations between the U.S. and China, which ended last week. After offering upbeat comments at the end of the discussions, Trump failed to follow-through on Monday with similar comments.

In his speech, Trump said any trade agreement with China “must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.”

Another government shutdown will be bearish for crude oil because it will come at a tremendous cost to the economy. This could drive the U.S. into recession, which would lead to lower demand. The inability to strike a deal with China will be bearish for its economy and likely fuel further weakness in the global economy. This would also have a negative effect on demand.

American Petroleum Institute Weekly Inventories Report

The API reported a crude inventory build of 2.514 million barrels for the week-ending February 1, slightly above the 2.179 million barrel forecast.

The API also reported a build in gasoline inventories for the week-ending February 1 in the amount of 1.731 million barrels. Analysts were looking for a build of 1.601 million barrels. Distillate inventories increased this week by 1.141 million barrels, versus an expected draw of 1.814 million barrels.

Daily Forecast

The fresh news suggests crude oil prices are likely to remain under pressure throughout the session on Wednesday unless there is a dramatic surprise in today’s U.S. Energy Information Administration’s weekly inventories report. It is expected to show a 1.30 million barrel build.

The OPEC-led supply cuts and the Venezuelan oil sanctions may slow down the rate of the decline, but without a trade deal with China, concerns about falling demand are likely to keep the pressure on crude oil prices.

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