Oil Price Fundamental Daily Forecast – Traders Bracing for China’s Counter Attack to New Tariffs

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Friday, rebounding from yesterday’s steep sell-off. The price action indicates that Thursday’s steep break may have been overdone. Nonetheless, the trend is down and there are heightened concerns over lower demand in anticipation of slower economic growth in China and the global economy.

At 08:44 GMT, September WTI crude oil is trading $55.03, up $1.08 or +2.00%. On Thursday, the market hit a low of $53.59, before settling 7.9% lower. October Brent crude oil is at $61.94, up $1.44 or +2.37%. Yesterday, it reached a low of $60.03, before settled 7.52% lower.

Crude oil plunged on Thursday after President Donald Trump said he would impose an additional 10% tariff on Chinese imports to the U.S.

Trump said in a series of tweets the tariff will be imposed on $300 billion worth of Chinese goods. The levy will take effect September 1. He added later in the day those levies could go up to 25%. Trump’s comments came after a U.S. delegation met with Chinese trade officials earlier this week.

In other news pointing to lower demand, U.S. manufacturing activity slipped last month, dropping to a near three-year low, and construction spending fell in June as investment in private construction projects tumbled to its lowest level in 1-1/2 years.

ISM Manufacturing PMI came in at 51.2, down from 51.7 and below the 52.0 forecast. Construction Spending fell 1.3%. Traders were looking for a 0.5% increase. The previous month was revised higher to 0.5%.

Earlier in the week, the U.S. Energy Information Administration (EIA) showed another larger-than-expected drawdown. However, this was somewhat offset by a slight increase in U.S. crude production during the week-ending July 26.

According to the EIA, U.S. crude oil production averaged 12.2 million barrels per day (bpd) last week, up by 900,000 bpd from the previous week and up by about 1.3 million bpd year on year.

Daily Forecast

We’re seeing a technical bounce early Friday as traders take profits and investors adjust positions in response to Thursday’s steep plunge. Traders are now awaiting countermeasures from China that should send prices even lower.

On Friday, China’s foreign ministry pushed back against President Trump’s latest tariff threat, reportedly saying the world’s largest economy should give up its illusions, shoulder some responsibility and come back to the right track on resolving the trade war.

China’s spokesperson at the foreign ministry, Hua Chunying, said at a daily press briefing that Beijing would have to take countermeasures if the U.S. was committed to putting more tariffs on Chinese goods, Reuters reported.

She added that while China did not want a trade war with the U.S., it was not afraid of fighting one.