Oil Price Fundamental Daily Forecast – Slow Demand Concerns, Technical Factors Weighing on Prices Early

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Monday shortly after the regular session opening. The markets are showing little reaction to the news that the U.S. and China have been making progress toward reaching an agreement on Phase 1 of a partial trade deal. News that the European Union has granted an extension to the United Kingdom over Brexit garnered little response from traders.

At 12:03 GMT, December WTI crude oil is trading $56.38, down $0.28 or -0.48% and December Brent crude oil is at $61.74, down $0.28 or -0.45%.

Weak Asian Demand Likely

Once again, the bearish price action is being driven by worries over weakening demand growth after China’s National Bureau of Statistics said on Sunday that profits at the country’s industrial sector fell 5.3% in September year-on-year.

The news highlights the impact of a slowing economy and protracted U.S. trade war on corporate balance sheets.

Additionally, Hong Kong’s Financial Secretary Paul Chan said in a blog post on Sunday, according to a Reuters report, that Hong Kong is now in a recession and it is “extremely difficult” to achieve the government’s original forecast of 0% to 1% annual growth made before the protests.

In Other News

U.S. Energy companies reduced the number of oil rigs operating this week, leading to a record 11-month decline as producers follow through on plans to cut spending on new drilling.

Money managers cut their net long U.S. crude futures and options positions in the week to October 22, the U.S. Commodity Futures Trading Commission said on Friday.

Daily Forecast

Besides the demand worries, technical factors are also weighing on prices after both WTI and Brent crude oil hit key retracement levels that encouraged investors to book profits after last week’s steep rise. With this in mind, traders should not be surprised by a short-term correction.

Any weakness is likely to be short-lived however because bullish traders may be anticipating the announcement of a partial trade deal between the U.S. and China after the U.S. Trade Representative’s office and China’s Commerce Ministry said on Friday that the two countries were “close to finalizing” some parts of a trade agreement.

Furthermore, traders have increased bets over the last two weeks that OPEC and its allies will make additional cuts to production after their December 5-6 meeting. However, Russian Deputy Energy Minister Pavel Sorokin said it was premature to talk about deeper production cuts.

Look for short-term weakness, but don’t be surprised by a spike to the upside if a trade deal is announced.