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Oil Price Fundamental Daily Forecast – Worries Over Global Demand Driving Prices Lower

By:
James Hyerczyk
Published: Jan 14, 2019, 10:10 UTC

Today’s price action is being fueled by a combination of profit-taking and position-squaring in reaction to a potential drop in demand for crude oil. New short-sellers could also be entering the market.

Crude Oil

U.S. West Texas Intermediate and international-benchmark crude oil futures are trading lower on Monday, continuing the sell-off that began on Friday with concerns over an economic slowdown in China. Today’s weakness is being fueled by a report that confirmed those concerns. According to the Chinese government, data showed weakening imports and exports in the world’s second largest economy.

At 0933 GMT, March WTI crude oil is trading $51.43, down $0.48 or -0.92% and March Brent crude oil is at $60.01, down $0.47 or -0.78%.

China Demand Worries

On Friday, crude oil prices weakened on concerns over an economic slowdown in China. These issues were raised after reports surfaced calling for lower Chinese GDP expectations. These suspicions were confirmed earlier today when the Chinese government said imports and exports had weakened.

According to an official trade balance report, China’s December exports fell by 4.4 percent from a year earlier, the biggest monthly drop in two years, pointing to further weakening in the world’s second-largest economy. Imports also contracted, falling 7.6 percent, the biggest decline since July 2016.

Prices fell as investors priced-in the possibility of lower demand for crude oil due to the weakening economy.

Forecast

Today’s price action is being fueled by a combination of profit-taking and position-squaring in reaction to a potential drop in demand for crude oil. New short-sellers could also be entering the market.

Last week, crude oil prices rallied over 5-percent, helped by successful mid-level trade talks between U.S. and Chinese officials. This raised hopes for a potential end of the on-going trade dispute between the U.S. and China. This week starts with investors reacting to data from last quarter. The direction of the market moving forward will be determined by whether U.S. and Chinese official can make a trade agreement in a timely manner.

Another factor that could limit losses is the supply cuts from OPEC, some non-OPEC allies and Russia. However, likely to cap gains will be on-going concerns about a global economic slowdown, the combination of these two factors suggests the WTI and Brent markets are likely to become rangebound.

Chart work suggests the March WTI crude oil futures contract is headed back to $48.14 to $46.85 over the near-term. The downside target for March Brent crude oil is $56.39 to $54.96.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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