Oil Price Fundamental Daily Forecast – In Position to Post Solid Weekly Gain on Weaker US Dollar

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher at the mid-session, buoyed by a weaker dollar and hope for more demand from China as the world’s largest consumer reopens its borders.

At 16:00 GMT, March WTI crude oil futures are trading $79.71, up $1.06 or +1.35% and March Brent crude oil is at $84.95, up $0.92 or +1.09%. The United States Oil Fund ETF (USO) is at $69.99, up $1.38 or +2.01%.

Both WTI and Brent are set for their seventh-straight session of gains. WI is also up 7.7% so far this week and Brent has jumped 8%.

Weak US Dollar Equals Strong Foreign Crude Oil Demand

The U.S. Dollar is trading at a seven-month low against a basket of major currencies at the mid-session. A weaker greenback tends to boost demand for dollar-denominated oil, making it more attractive to foreign buyers.

The dollar index is testing its lowest level since June 6, following data on Thursday that showed cooling U.S. inflation, firming up expectations the Federal Reserve will slow the pace of its interest rate hikes.

In other news, the University of Michigan Surveys on Friday showed that U.S. consumers believe price pressures would ease back to levels seen in the spring of 2021 over the next year.

Chinese Crude Purchases Rise

Reuters is reporting that recent Chinese purchases and a pick-up in road traffic in the country are also fueling hopes of a demand recovery in the world’s second-largest economy following the reopening of its borders and easing of COVID-19 curbs after protests last year.

Analysts Like the Pick-up in China Road Traffic

“Everyone is looking at Chinese mobility indicators and they point upward, indicating recovering oil demand and supporting prices,” said UBS analyst Giovanni Staunovo.

ANZ analysts said a congestion index covering the 15 Chinese cities with the largest number of vehicle registrations had risen 31% from a week earlier.

Short-Term Outlook

Bullish traders are betting on more price gains as traders anticipate a further drop in Russian supply and the normalization in China’s fuel demand. Some buyers expect to see further signs of recovering oil demand in the form of higher Chinese crude imports and possible increases in the demand outlooks for energy agencies like the International Energy Agency (IEA) and OPEC.

Nonetheless, traders should be prepared for periodic bouts of selling pressure due to the current looseness of the oil balance.