Yahoo Finance Oil Price Fundamental Weekly Forecast – We’ll Find Out This Week if Traders Liked the Trade Deal
U.S. West Texas Intermediate and International-benchmark Brent crude oil closed at multi-month highs last week, helped by positive developments in trade negotiations between the United States and China, and an easing of tensions over the U.K.’s plan to leave the European Union. Both events offset concerns over global demand growth after a warning from the International Energy Agency, and a surprise build in U.S. supply.
Last week, February WTI crude oil settled at $59.98, up $0.88 or +1.49% and February Brent crude oil finished at $65.22, up $0.83 or +1.27%.
Phase One Trade Deal Announced
U.S. President Donald Trump and Chinese officials said Friday that they have agreed to a “phase one” trade deal that included cutting American tariffs on Chinese goods.
The two countries have reached an agreement where Washington would suspend tariffs on Chinese imports scheduled for Sunday, while Beijing would step up purchases of agricultural products.
But they offered no specific details on the amount of U.S. agricultural goods Beijing had agreed to buy, a key sticking point of the lengthy deal negotiations.
API, EIA Report Surprise Weekly Inventory Increases
Both the American Petroleum Institute (API) and Energy Information Administration (EIA) weekly inventories reports showed unexpected builds in crude oil supply during the prior week.
The American Petroleum Institute (API) reported an estimated weekly crude oil inventory build of 1.41 million barrels for the week-ending December 4. Analysts were looking for a 2.763-million-barrel draw in inventory.
The U.S. Energy Information Administration (EIA) reported a crude oil inventory build of 800,000 barrels for the week-ending December 6. Traders were expecting a 2.9-million-barrel draw in inventory. The EIA also reported a gasoline inventory increase of 5.4 million barrels.
OPEC Calls for Supply Deficit, IEA Predicts Slower Demand Growth
OPEC last Wednesday said it now expected a small deficit in the oil market in the next year, suggesting the market is tighter than previously thought – even before the latest pact with other producers to curb supply takes effect.
The revised forecast by OPEC marks a further retreat from a prediction of a glut in 2020 as U.S. production growth begins to slow.
The Paris-based International Energy Agency (IEA) said, “Despite the additional curbs…and a reduction in our forecast of 2020 non-OPEC supply growth to 2.1 million barrels per day (bpd), global oil inventories could build by 700,000 bpd in Q1 2020.”
Weekly Forecast
On paper, the trade deal is a positive event, but there are problems with the details that could encourage investors to book profits after the current prolonged rally. The overall market is viewing the event as positive, but the price action on Friday suggested it may have already been priced into the market.
The trade deal will include a rollback of some of the China tariffs and halts additional levies set to take effect on Sunday. China agreed to significant purchases of U.S. agricultural products, but the amount is below what the White House was reportedly pushing to get. On the U.S. side, investors were hoping for more than just a partial rollback of some tariffs.
If the deal is accepted by traders, then this, along with the outcome of the U.K. general election, should begin to fuel a rebound in global manufacturing which should lift oil demand growth over the long-run.
If traders reject the deal then prices could retreat this week.
This article was originally posted on FX Empire
More From FXEMPIRE:
The Weekly Wrap – The FED, Trade and the Tories Drove the Majors
NZD/USD Forex Technical Analysis – Trader Reaction to .6579 Will Set the Tone on Monday
Gold Price Prediction – Prices Trade Sideways Following Trade Deal Announcement
Bitcoin Cash ABC, EOS and Ethereum – Daily Tech Analysis – 15/12/19
AUD/USD and NZD/USD Fundamental Weekly Forecast – Trade Deal Concerns Could Weigh on Aussie, Kiwi
