Oil Price Fundamental Weekly Forecast – Rangebound as Traders Await Trade Deal News

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures settled slightly higher last week. The markets were headed for a lower close for the week, but a late session turnaround on Friday turned the markets higher. The central theme putting a lid on prices was the global economic slowdown. Contributing to selling pressure was widespread weakness in the Euro Zone, China and the United States.

Last week, May WTI crude oil settled at $56.43, up $0.24 or +0.43% and May Brent crude oil closed at $65.74, up $0.67 or +1.02%.

Wicked Trade on Friday

Crude oil began Friday’s session under pressure due to a dovish European Central Bank and weak trade balance data from China, however, the selling accelerated after the U.S. Non-Farm Payrolls report badly missed the forecasts. Prices turned higher late in the session on increased demand for risk as the stock market mounted a strong comeback.

Additionally, oilfield services firm Baker Hughes reported the number of oil rigs operating in U.S. fields fell for a third straight week.

Weakness in Euro Zone, China

In the Euro Zone on Thursday, European Central Bank President Mario Draghi said the European economy was in “a period of continued weakness and pervasive uncertainty”. Conditions in the Euro Zone were perceived as so bad that the ECB:  pushed back the timing of its first post-crisis interest rate hike to 2020, cut its economic forecasts and launched a new round of cheap bank loans.

In China on Friday, dollar-denominated February exports fell 21 percent from a year earlier. This was the biggest drop in three years and far worse than analysts had expected. Imports also dropped 5.2 percent. So far, oil demand has remained steady, where imports of crude oil remained above 10 million barrels per day (bpd). However, an economic slowdown is likely to dent fuel demand and pressure prices at some point.

Plunge in U.S. Job Creation Raises Red Flag

Crude oil futures are extending earlier losses on Friday after U.S. government data showed the economy added just 20,000 jobs in February, compared with estimates for a gain of 180,000 positions. Somewhat offsetting the news was a drop in the unemployment rate to 3.8 percent. Average hourly earnings were another positive, increasing by 3.4 percent on year over year.

Weekly Forecast

Last week’s price action indicates that although prices are being supported by the OPEC-led supply cuts and the U.S. sanctions on Venezuela and Iran, there are major concerns over falling global demand. Additionally, rising U.S. output is offsetting efforts by OPEC to trim the oversupply.

This week’s focus could return to the U.S.-China deal that could end the year-long trade dispute. Officials are saying the talks are progressing, but the timing of any announcement is uncertain. Furthermore, U.S. President Trump and China President Xi Jinping haven’t announced a meeting date. Traders are saying that negotiators are going line by line through the developing agreement, and that some Chinese officials fear that Trump may walk away from negotiations if he doesn’t like the deal.

The announcement of a trade deal remains the wildcard. However, most agree that if one is announced, crude oil traders will respond positively, which could send prices sharply higher. In the meantime, prices are likely to remain rangebound.