Oil Price Fundamental Daily Forecast – Softer Dollar Supportive, but Lower Demand Still Major Concern

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading slightly lower on Thursday. We’ve seen a bounce off the lows, which is probably related to the softer dollar. This tends to drive up foreign demand for dollar-denominated crude oil. However, the main concerns for traders remains increasing supply and a potential slowdown in demand.

At 0913 GMT, October WTI crude oil futures are trading $64.35, down $0.11 or -0.17% and October Brent crude oil is at $70.75, down $0.01 or -0.01%.

Traders are also saying that short sellers are paring positions in response to the news that Beijing will be sending a delegation to Washington in late August to try to resolve the trade dispute between the world’s two largest economies.

Crude oil is in a position to close lower this week with the bulk of the loss taking place on Wednesday after the release of a bearish government report. The U.S. Energy Information Administration said yesterday that crude oil inventory levels rose by 6.8 million barrels, to 414.19 million barrels. Traders were looking for a 2.6 million barrel draw down.

The EIA also said that U.S. crude production rose by 100,000 barrels per day (bpd) in the week-ending August 10, to 10.9 million bpd.

Forecast

Although there are still lingering concerns over supply due to the sanctions against Iran, the possibility of lower demand due to a global economic slowdown caused by trade disputes, rising interest rates and collapsing emerging markets is the story at this time.

The bets seem to be shifting toward the downside and this trend is likely to continue over the short-run unless there is an unexpected supply disruption.