Yahoo Finanza Oil Price Fundamental Daily Forecast – COVID-Related Demand Fears Have Buyers Looking for Value
U.S. West Texas Intermediate and international benchmark Brent crude oil futures are trading nearly flat on Tuesday, following a steep sell-off the previous session. Concerns over COVID-19 restrictions combined with slowing factory activity in the United States and China weighed on sentiment enough to encourage weak longs to book profits after an eight-session counter-trend rally.
At 07:42 GMT, September WTI crude oil is trading $71.50, up $0.24 or +0.34% and October Brent crude oil futures are at $73.10, up $0.21 or +0.29%.
Coronavirus Concerns Increasing, Raising Demand Fears
ANZ analysts in a note highlighted resurgent economic risks to major oil consumer China from the coronavirus pandemic.
“Cases of the highly contagious Delta variant have emerged in 14 of 32 provinces. This could see further mobility restrictions introduced,” ANZ analysts wrote.
Meanwhile, authorities in Wuhan have announced that they will test its entire population for COVID-19 after the central Chinese city where the coronavirus first emerged reported its first local cases in more than a year and the country moved to stamp out a slew of outbreaks connected with the Delta variant.
The city of 11 million is “swiftly launching comprehensive nucleic acid testing of all residents”, senior Wuhan official Li Tao told the media on Tuesday.
China has confined the residents of entire cities to their homes, suspended domestic transport links and rolled out mass testing in recent days as it battles its largest coronavirus outbreak in months.
Slowing US, China Manufacturing Activity Key Concern
Oil prices are being pressured by worries over China’s economy after a survey showed factory activity growing at its slowest pace in 17 months in the world’s second-largest oil consumer.
China’s factory activity expanded in July at the slowest pace in nearly a year and a half as higher raw material costs, equipment maintenance and extreme weather weighed on business activity, adding to concerns about a slowdown in the world’s second-biggest economy.
Demand concerns are also being fueled by weak U.S. factory data. On Monday, it was reported that the U.S. manufacturing sector kept expanding in July, but at a slower pace than a month ago. The July Manufacturing PMI registered 59.5%, a decrease of 1.1 percentage points from the June reading of 60.6 percent, according to the Institute for Supply Management.
Daily Forecast
Besides the new demand concerns, crude oil traders are also keeping a close eye on supply after a Reuters survey found that oil output from OPEC rose in July to its highest since April 2020, as the group further eased production curbs under a pact with its allies and top exporter Saudi Arabia phased out a voluntary supply cut.
In other supply related news, the American Petroleum Institute (API) will release its crude oil and products inventory report at 20:30 on Tuesday. Crude and products likely declined the week-ending July 30 with both distillates and gasoline stockpiles predicted to have fallen for a third straight week, a preliminary Reuters poll showed on Monday.
Our chart work suggests that traders are looking for value rather than to chase prices higher. For September WTI traders, the value zone is $69.62 to $68.53. October Brent traders are likely eyeing $71.26 to $70.22 for value.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
