Oil Price Fundamental Daily Forecast – Threat of Chinese Counter-Measures Weighing on Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil are trading lower on Thursday as fears of recession are leading to increasing worries over future demand. An unexpected build in American Petroleum Institute (API) and U.S. Energy Information Administration (EIA) weekly inventories is also pressuring prices. We’re also looking at follow-through selling following disappointing economic reports in China and Europe on Wednesday.

At 10:10 GMT, October WTI crude oil is trading $54.20, down $1.03 or -1.85% and December Brent crude oil is at $57.62, down $1.02 or -1.74%.

There is also breaking news that China has to take counter-measures to latest U.S. tariffs.

Recession Fears

Recession fears were raised on Wednesday after the bond market flashed a troubling signal about the U.S. economy. This increased worries over lower future demand. The fears were triggered when the yield on the benchmark 10-year Treasury note briefly broke below the two year rate, “an odd bond market phenomenon that has been a reliable indicator of economic recessions,” according to CNBC.

A recession occurred, on average, 22 months after the inversion, Credit Suisse research showed. Nonetheless, investors are bailing out of higher risk assets like crude and seeking shelter in Treasurys and Japanese Yen.

EIA Reports Surprise Inventories Build

On Wednesday, the government reported that U.S. crude stocks grew by 1.6 million barrels the week-ending August 9, compared with analyst expectations for a decrease of 2.8 million barrels, as refineries cut output, the EIA said in a report.

Additionally, at 440.5 million barrels, inventories were about 3% above the five-year average for this time of year, the EIA said.

Impact of Trade Dispute Spreading

Also on Wednesday, China reported disappointing data for July, including a surprise drop in industrial output growth to a more than 17-year low and a slump in exports sent Germany’s economy into reverse in the second quarter. Both reports underlined the widening economic cracks as the trade war between the United States and China intensifies.

Daily Forecast

Breaking news is having an impact on crude oil prices today. Early Thursday, China said it has to take necessary counter-measures to the latest U.S. tariffs on $300 billion of Chinese goods, according to its finance minister.

The ministry also said the U.S. tariffs violate a consensus reached by leaders of the two countries and get off the right track of resolving disputes via negotiation, according to CNBC.

This announcement comes just two days after President Trump announced the delay of tariffs until mid-December on some goods. That news drove crude oil prices sharply higher so counter-measures by China could weigh even further on crude prices throughout the day.