Oil Price Fundamental Daily Forecast – Pressured by China Demand Concerns as Traders Mull Bullish Factors

U.S. West Texas Intermediate and international-benchmark Brent Crude oil futures dipped lower on Wednesday as concerns over a surge in COVID-19 cases in China, the world’s biggest oil importer, offset the chances easing pandemic restrictions in the country will boost fuel demand.

On Wednesday, March WTI crude oil settled at $79.08, down $0.56 or -0.70% and March Brent crude oil finished at $83.99, down $0.69 or -0.81%. The United States Oil Fund ETF (USO) closed at $68.59, down $0.94 or -1.35%.

China:  Good News, Bad News

The good news that could be read as a first step toward increased demand is that China will stop requiring inbound travelers to quarantine from Jan. 8. Bullish traders are hoping this eventually leads towards relaxing stringent curbs on its borders.

The bad news is China may be losing control of COVID outbreaks. According to reports, Chinese hospitals have been under intense pressure due to a surge in COVID infections.

Lower Russian Output Potentially Bullish

Although the market weakened from a three-week high hit earlier in the week, there is plenty of potential upside risk for prices. One of these factors is lower Russian output.

According to reports, Russia said it aims to ban oil sales from February 1 to countries that abide by a G7 price cap imposed on December 5, although details of how the ban would work were unclear.

OPEC+ Cuts are Supportive

In October, OPEC and its allies known as OPEC+ agreed to cut output by 2 million barrels per day (bpd) – equal to 2% of global supply – causing one of the biggest clashes with the West as the U.S. administration called the surprise decision short-sighted.

“The current cut of 2 million barrels per day by OPEC+ continues until the end of 2023 and if there is need to take measures by reducing production to balance supply and demand we always remain ready to intervene,” Saudi Energy Minister Prince Abdulaziz bin Salman was quoted by state news agency SPA.

Short-Term Outlook

Traders will be paying close attention to any new developments from China, but the outlook doesn’t look good for demand with COVID infections rising substantially.

Crude oil traders will also get the chance to react to the latest U.S. inventories report from the week-ending December 23. Crude oil inventories are expected to have fallen while gasoline and distillate stocks are expected to have risen. This is based on data from the American Petroleum Institute (API) figures released on Wednesday.

The Energy Information Administration (EIA) will release its weekly inventory figures at 15:30 GMT on Thursday.