Oil Price Fundamental Daily Forecast – Renewed Demand Concerns in Europe Weighing on Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on renewed concerns over increasing U.S. supply and fresh worries about demand especially in Europe after countries including Germany and France halted COVID-19 vaccinations.

Traders are also monitoring the rise in the U.S. Dollar, which tends to weigh on foreign demand for dollar-denominated crude oil. Finally, general nervousness ahead of the start of the Fed’s two-day meeting could also be capping gains.

At 11:51 GMT, May WTI crude oil is trading $64.54, down $0.90 or -1.38% and June Brent crude oil is at $67.46, down $0.87 or -1.27%.

Rising US Stockpiles Putting Lid on Prices

The American Petroleum Institute (API) announces its weekly inventories at 20:30 later today and the U.S. Energy Information Administration (EIA) reports on Wednesday, but traders are already anticipating a rise in U.S. stockpiles because of last month’s Arctic freeze in Texas which halted refining operations in the area that have taken longer than expected to reach full operation.

“Short-term direction will be set up by the weekly U.S. inventory reports,” PVM analysts said in a note, adding the strength of the dollar against other currencies is weighing on oil prices.

New Risks to Demand Recovery

Reuters is reporting that Germany, France and Italy plan to suspend AstraZeneca COVID-19 injections after reports of possible serious side effects, although the World Health Organization (WHO) said there was no established link to the vaccine.

The suspension of the vaccine may delay the economic recovery from the pandemic in one of the hardest-hit areas.

Daily Forecast

While slower demand expectations in Europe may be weighing on prices this week, keep in mind that OPEC and its allies cited this possibility as one of the reasons for maintaining its output cuts at current levels.

The market may show some short-term weakness to the renewed demand worries, but the longer-term trend will continue to be supported by OPEC+.

Meanwhile, today’s API report is expected to show a rise in U.S. inventories although it’s not expected to be as large as last week’s 12.79 million barrel build.

Traders should also pay closer attention to the gasoline and distillate inventories numbers since they may drawdown enough to offset any potential bearish reaction to a rise in crude inventories.