Oil Price Fundamental Daily Forecast – Strong GDP Data Could Ease Concerns Over Lower Demand

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Friday and in a position to finish higher for the week as geopolitical tensions in the Middle East continue to attract speculative buyers. Gains, however, are being capped by worries over slower global economic growth amid the lingering U.S.-China trade dispute.

At 11:42 GMT, September WTI crude oil futures are trading $56.42, up $0.40 or +0.71% and September Brent crude oil futures are at $63.73, up $0.34 or +0.54%.

Middle East Tensions

According to the latest reports, tensions remain high around the Strait of Hormuz because Iran is refusing to release the British flagged oil tanker it commandeered last week in the Gulf.

In the meantime, U.S. Secretary of State Mike Pompeo said Washington had asked Japan, France, Germany, South Korea, Australia and other nations to join maritime security efforts.

U.S. Energy Information Administration Weekly Inventories Report

According to the EIA, U.S. crude oil inventories declined 10.8 million barrels in the week ending July 19. Traders were expecting the EIA to report an inventory draw of 4.2 million barrels.

Gasoline inventories fell by 200,000 barrels last week, following the prior week’s 3.6 million barrel increase. Gasoline production, the EIA said, averaged 10.1 million bpd last week, up from 9.9 million bpd a week earlier.

Distillate fuel inventory increased 600,000 barrels. During the week-ending July 12, distillate fuel inventories jumped 5.7 million barrels. Production last week averaged 5.2 million barrels per day, versus 5.4 million bpd a week earlier.

Additionally, refineries processed 17 million bpd in the seven days to July 19, down from 17.3 million bpd processed on average in the previous week.

Weakening Global Economy

Recently, OPEC and the International Energy Agency warned of lower future demand. On Friday, a Reuters poll taken July 1-24 showed the growth outlook for nearly 90% of the more than 45 economies surveyed was downgraded or left unchanged. That applied not just to this year but also 2020.

Daily Forecast

Although speculative buyers continue to buy futures and options contracts in case there is a supply disruption in the Middle East, traders don’t really believe a military conflict is imminent.

At 12:30 GMT, traders will shift their focus to the U.S. Advance GDP report. It is expected to come in at 1.8%, down from the previously reported 3.1%. A bigger than expected number could ease concerns over demand. A smaller number will mean the economy is weakening, which could put pressure on prices throughout the session.