Oil Price Fundamental Daily Forecast – Worries Over Economic Headwinds Weighing on Demand

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday after failing to follow-through to the upside following yesterday’s strong performance. Concerns about demand are weighing on prices with headwinds facing the U.S. and global economy likely to intensify in the months ahead.

Although trade talks over the first phase of a partial trade deal between the United States and China are progressing well, crude oil traders don’t feel an agreement between the two economic powerhouses will have much of a positive impact on demand until the tariffs are lifted.

At 09:07 GMT, December WTI crude oil is trading $55.58, down $0.38 or -0.68% and December Brent crude oil is at $60.89, down $0.29 or -0.49%.

Crude Oil Inventory

On Wednesday, WTI and Brent crude oil soared more than 2% on the back of a surprise draw in U.S. crude stocks.

According to the U.S. Energy Information Administration (EIA), crude inventories fell 1.7 million barrels in the week-ended October 18, compared with analysts’ expectations for a 2.2 million barrel build. This was a stark contrast with earlier inventory data released by industry group the American Petroleum Institute (API), which showed a build of 4.5 million barrels in U.S. crude stocks.

The EIA said the drawdown in weekly stocks came as refiners hiked crude runs and oil imports fell, which prodded a jump in both benchmark crude grades on Wednesday.

Daily Forecast

Wednesday’s rally was impressive with Stephen Innes, market strategist at AxiTrader going as far as saying the EIA report may be an indication that oil demand is not as bad as a current dreary run of global headline macro data might suggest.

Most traders, however, believe demand will continue to be brought into question as long as the U.S. and China tariffs continue to weigh on the global economy.

My analysis shows the market is currently being supported by the prospect of additional production cuts by OPEC and its allies. However, traders may not know for certain if this will happen until producers meet to review policy on December 5-6.

Prices are likely to remain rangebound as long as there is no major breakthrough in U.S.-China trade relations and OPEC continues to ponder additional cuts in output.