Oil Price Fundamental Daily Forecast – Trade Deal Optimism Offsetting Worries Over Supply

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Thursday, recovering some of yesterday’s steep loss. The early session rally is being fueled by renewed optimism over a U.S.-China trade deal after the two economic powerhouses agreed to reduce tariffs. Despite the potentially bullish development, traders remain cautious over a potential delay in sealing the long-awaited interim trade deal and a huge increase of U.S. crude stockpiles.

At 09:53 GMT, December WTI crude oil is trading $57.05, up $0.70 or +1.26% and January Brent crude oil is at $62.54, up $0.80 or +1.30%.

Bearish News

WTI and Brent crude oil sold-off sharply on Wednesday after a report that a meeting between U.S. President Donald Trump and Chinese President Xi Jinping to sign an interim deal could be delayed until December as talks continue over terms and venue, a senior official of the Trump administration told Reuters on Wednesday.

It was still possible the “phase one” agreement aimed at ending a damaging trade war would not be reached, but a deal was more likely than not, the official said on condition of anonymity.

Crude oil was also pressured by the news that U.S. stockpiles rose 7.9 million barrels the week-ending November 1 as refiners cut output and exports fell, the Energy Information Administration (EIA) said on Wednesday. Traders were looking for an increase of 1.5 million barrels.

Helping to ease the pressure on prices was the news that gasoline and distillate inventories dropped 2.8 million barrels and by 622,000 barrels respectively.

Bullish News

WTI and Brent crude oil is trading higher on Wednesday, after China said the world’s two largest economies had agreed to remove existing trade tariffs.

Gao Feng, a ministry spokesperson for China’s Commerce Ministry, said that both sides had agreed to simultaneously cancel some existing tariffs on one another’s goods, according to the country’s state broadcaster.

The ministry spokesperson said that both sides were closer to a so-called “phase one” trade agreement following constructive negotiations over the past two weeks.

Daily Forecast

Expectations for a thaw in trade tensions have supported oil prices over the past several sessions along with expectations of deeper production cuts by OPEC and its allies. At the same time, gains have been limited by rising U.S. supply.

The direction of the markets on Thursday will be determined by whether traders decide that renewed optimism over trade relations is a bigger event than the rise in crude oil supplies. Keep in mind that the trade deal has long-term ramifications and the crude supply is a week-to-week situation.