Oil Price Fundamental Daily Forecast – Rangebound Until Trade Deal is Announced

U.S. West Texas Intermediate and international benchmark Brent crude oil are trading steady-to-lower on Tuesday amid new concerns over demand. The catalyst behind the weakness is China’s decision to cut is 2019 economic growth target. However, prices continued to be underpinned by the OPEC-led production cuts. Late today, investors will get the opportunity to react to the latest inventories data from the American Petroleum Institute (API).

At 09:56 GMT, April WTI crude oil is trading $56.21, down $0.38 or -0.67% and May Brent crude oil is at $65.26, down $0.41 or -0.62%.

Bearish Factors Piling Up

Despite the successful efforts by OPEC and its allies to reduce production, trim the excess global supply and stabilize prices, a number of bearish factors are starting to pile up which should help to limit gains, and could turn sentiment bearish fairly quickly.

Traders are saying overhang from last year’s surpluses are still a worry as well as rising U.S. production. The latest data also shows that QECD commercial inventories are still stuck above the five-year average.

Furthermore, oil demand has been softening along with slowing economic activity in Europe and Asia.

Hopes for future demand were dealt a blow early Tuesday when China said it was targeting economic growth of 6.0 to 6.5 percent in 2019, down from the 6.6 percent growth reported last year, which was already the lowest in decades.

Demand for gasoline is also raising concerns, which traders partly blame on improving fuel efficiency. “2018 was the weakest (refined product) demand growth year since 2011,” Bank of America Merrill Lynch said in a note.

Daily Forecast

There is nothing in the news today that could be perceived as bullish so we expect to see gains capped. Underpinning prices will be the OPEC-led production cuts as well as the U.S. sanctions on Iran and Venezuela.

While a potential trade deal between the United States and China has been grabbing the headlines, the timing of a deal is difficult to gauge. We may see a spike in crude oil prices when the news is finally announced, however, some traders believe that the story has already been priced into the market.

We do know that OPEC and is allies were scheduled to meet in April to decide whether to continue withholding supply, however, traders are now saying a decision would likely be pushed into June. This isn’t a deal breaker, however, since the production cuts are expected to continue.

Prices of both WTI and Brent are likely to remain rangebound over the near-term until a U.S.-China trade deal is announced.