Oil Price Fundamental Daily Forecast – Supported by China Export Jump, Russian Crude Price Recovery

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Monday while trading inside Friday’s range. The price action suggests investor indecision and impending volatility. Traders haven’t confirmed the previous session’s technical closing price reversal bottom either, another sign of cautiousness among traders.

At 05:23 GMT, September WTI crude oil is trading $89.27, up $0.26 or +0.29% and December Brent crude oil is at $92.37, up $0.45 or +0.49%. On Friday, the United States Oil Fund ETF (USO) settled at $71.53, unchanged.

Friday’s Recap

Friday was volatile session with the markets trading sharply lower shortly before the release of a U.S. Non-Farm Payrolls report on the notion that that the Fed’s rate hikes would cause a recession and drive down demand.

Prices reversed course to close higher on Friday, however, after stronger-than-expected jobs data indicated the economy would avoid recession, and allow the Fed to raise rates more aggressively.

Both markets were down for the week with front-month Brent prices hitting their lowest levels since February, tumbling 13.7% and posting their largest weekly drop since April 2020. Meanwhile, nearby WTI lost 9.7%, as concerns over rising U.S. supply had traders questioning demand.

Faster China Export Growth Surprises Traders

Improving investor appetite for risk is helping to underpin prices early Monday as solid Chinese export data eased recession concerns.

China’s export growth unexpectedly picked up speed in July, offering an encouraging boost to the economy as it struggles to recover from a COVID-induced slump, but weakening global demand could start to drag on shipments in coming months.

Exports rose 18.0% in July from a year earlier, the fastest pace this year, official customs data showed on Sunday, compared with a 17.9% increase in June and beating analysts’ expectations for a 15.0% gain.

Daily Forecast

Although prices are getting some support from China’s export news, one should take it with a grain of salt because it may not have been a true reflection of the domestic economy. This is because crude oil imports in July fell 9.5% from a year earlier as fuel demand recovered more slowly than expected due to fresh virus outbreaks.

Also expected to weigh on prices over the near-term are worries over U.S. gasoline demand and China’s zero-COVID strategy. Both encouraged ANZ to revise down its oil demand forecasts for 2022 and 2023 by 300,000 bpd and 500,000 bpd, respectively. Oil demand for 2022 is also expected to come in a little below pre-pandemic highs.

There is some bullish news, but probably not enough to change the daily trend to up. Reuters is reporting that spot prices for Russia’s key export crude grade ESPO Blend to Asia have rebounded from all-time lows amid strong demand from top buyers India and China and easing concerns about possible sanctions.

With some traders locked onto worries about Fed rate hikes, we could see limited price action until Wednesday with the release of a U.S. consumer inflation report.