Oil Price Fundamental Daily Forecast – Plenty of Supply, Lower Demand Forecasts Weigh on PricesToday’s price action suggests what we’ve been saying for about two weeks – crude oil prices are likely to remain rangebound as sellers, betting on slower demand growth, keep a lid on rallies, and buyers hoping for higher demand because of the U.S.-China trade deal, bet on a global economic recovery.
U.S. West Texas Intermediate and international-benchmark crude oil futures are trading sharply lower on Tuesday, shortly after the regular session opening. Prices are being pressured by expectations that a well-supplied market would be able to absorb disruptions that have cut Libya’s crude production to a trickle.
A drop in demand for risky assets may have also been behind the selling pressure. Stocks sold-off and demand for safe-haven assets jumped earlier in the session on fears of contagion of the Coronavirus in China.
Additionally, a bearish economic outlook from the International Monetary Fund (IMF) may have also encouraged investors to sell crude oil on the fear of slower global demand growth.
Libya’s Crude Export Capacity Under Force Majeure
If Libyan exports are halted for any sustained period, storage tanks will fill within days and production will slow to 72,000 barrels per day (bpd), said a spokesman for state oil company NOC. Libya has been producing about 1.2 million bpd recently.
Any supply disruptions could be offset by increased output from OPEC, which could limit the impact on global oil markets, the head of Japan’s petroleum industry body said.
Furthermore, ING said that spare OPEC capacity, which stands in excess of 3 million bpd, was reassuring the market.
IMF Forecasts Slower Growth
The IMF on Monday trimmed back its 2020 global economic growth forecasts by a tenth of a percentage point to 3.3% because of sharper than expected slowdowns in India and other emerging markets. But the IMF said that a U.S.-China trade deal was another sign that trade and manufacturing activity could soon bottom out.
Today’s price action suggests what we’ve been saying for about two weeks – crude oil prices are likely to remain rangebound as sellers, betting on slower demand growth, keep a lid on rallies, and buyers hoping for higher demand because of the U.S.-China trade deal, bet on a global economic recovery.
Furthermore, the absence of any major conflicts in the Middle East will also make it difficult to sustain a rally.