Oil Price Fundamental Daily Forecast – Pressured by Low Demand Fears Amid Rising Supply

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply lower on Thursday on renewed concerns over lower demand and excessive supply. The sell-off is being driven by a rise in gasoline inventories according to government data and returning energy supply from Libya and Russia.

At 10:51 GMT, September WTI crude oil is trading $95.01, down $4.87 or -4.88% and September Brent crude oil is at $101.92, down $5.00 or -$4.68%. On Wednesday, the United States Oil Fund ETF (USO) settled at $77.63, down $0.42 or -0.54%.

The overall theme in the market is how are professionals going to navigate a trading environment where one day the major concern is global demand and the next day the big worry is over supply?

On one hand we have the potentially bullish loss of Russian supply because of Western nation sanctions following the country’s invasion of Ukraine. On the other hand, worrying investors are aggressive rate hikes by the Federal Reserve and other major central banks that could send the global economy into recession.

US Gasoline Supply Increase Points toward Lower Demand

The U.S. Energy Information Administration (EIA) reported on Wednesday that U.S. gasoline stockpiles posted a larger-than-expected build on weakened demand during the week-ending July 15.

According to the EIA, gasoline demand continued to sag, and supply of that product over the last four weeks was 8.7 million bpd, or about 7.6% lower than the same time a year ago. This news came as a surprise since the United States is in the middle of the summer driving season.

Furthermore, U.S. gasoline stocks rose by 3.5 million barrels in the week to 228.4 million barrels, compared with expectations for a 71,000-barrel rise.

Libya’s NOC Says Production Resumed at Several Oilfields

Libya’s National Oil Corp (NOC) said on Wednesday crude production had resumed at several oilfields, after lifting force majeure on oil exports last week.

Production has restarted at fields belonging to Waha Oil Company at a rate of 70,000 barrels per day (bpd) and will be gradually increased until normal rates are achieved, the state-owned NOC said in a statement.

Daily Forecast

Traders are now bracing for the European Central Bank (ECB) interest rate hike which could come in as low as 25 basis points or as high as 50 basis points. A big rate hike could put further pressure on crude oil prices because it can weigh on demand.

Volume remains on the low side so we could see a couple of exaggerated moves today. Be prepared for heightened volatility.