Oil Price Fundamental Daily Forecast – Underpinned by Middle East Tensions, Capped by Demand-Growth Worries

The markets want to hear that the Fed is ready to be aggressive in its fight to prevent a global recession. If Powell delivers the right message, crude oil prices could rally on expectations that an aggressive Fed policy would lead to higher demand.
James Hyerczyk
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading slightly higher on Thursday following a steep reversal to the downside the previous session. Mixed data from the government’s weekly inventories report drove prices sharply lower on Wednesday after they hit their highest levels in over a week.

At 07:55 GMT, October WTI crude oil futures are trading $55.82, up $0.14 or +0.25% and December Brent crude oil is at $59.38, up $0.05 or +0.08%.

Also putting a lid on prices are mounting concerns about a slowdown in economic and oil-demand growth. Traders are particularly worried about the prospects of global oil demand especially amid lingering trade tensions between U.S. and China, the world’s two major economies.

“If trade uncertainties persist it will be difficult for oil to shrug off concerns about the threat to global demand,” said Stephen Innes, a managing partner at Valour Markets.

Helping to support the market are simmering tensions between the United States and Iran, with Iranian President Hassan Rouhani cautioning Washington against tightening pressure on Tehran.

In a veiled threat, Rouhani said on Wednesday, if Iran’s oil exports are cut to zero, international waterways will not have the same security as before.

Iranian Foreign Minister Mohammad Javad Zarif said Tehran might act “unpredictably” in response to U.S. policies under President Donald Trump.

U.S. Energy Information Administration

After holding steady to higher early Wednesday, prices fell after data from the EIA showed bigger-than-expected builds in U.S. fuel inventories last week. Gasoline stocks rose by 312,000 barrels, while distillate supplies grew by 2.6 million barrels.

Crude stockpiles decreased 2.7 million barrels, a bigger drawdown that the 1.9 million barrels that analysts had forecast, but the rises in refined product inventories offset the news.

“It looks like gasoline demand has peaked for the season, and will only trend lower from here,” said John Kilduff, partner at energy hedge fund Again Capital Management in New York.

Daily Forecast

We could be looking at a mostly sideways trade on Thursday with traders reluctant to commit to either side of the market ahead of Fed Chair Jerome Powell’s speech on Friday. The markets want to hear that the Fed is ready to be aggressive in its fight to prevent a global recession. If Powell delivers the right message, crude oil prices could rally on expectations that an aggressive Fed policy would lead to higher demand.

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