Oil Price Fundamental Daily Forecast – Upside Limited by Recession Worries, SPR Release

U.S. West Texas Intermediate and International-benchmark Brent crude oil futures are edging lower on Tuesday on worries over a recession and reports that the U.S. could sell oil from its emergency reserve this week. The recession fears are being fueled by concerns over lower fuel demand from China as it persists with its stringent zero-COVID policy.

At 11:32 GMT, December WTI crude oil futures are trading $84.27, down $0.26 or -0.31% and December Brent crude oil is at $91.48, down $0.14 or -0.15%. On Monday, the United States Oil Fund settled at $70.14, down $0.03 or -0.04%.

Pressured by Worries over China’s Economic Growth

Helping to cloud China’s demand outlook was the world’s top crude oil importer’s delay in the release of key economic indicators originally scheduled to be publish early Tuesday. These reports included data on industrial production and Gross Domestic Product growth. Both are respected indicators of future demand.

China’s adherence to its zero-COVID policy has continued to increase uncertainties about the country’s economic growth.

More US Strategic Petroleum Reserve Oil Coming to Market This Week

In another bearish development, the Biden administration plans to sell oil from the Strategic Petroleum Reserve (SPR) in a bid to dampen fuel prices before next month’s congressional elections, three sources familiar with the matter said on Monday, Reuters reported.

Biden said last week gasoline prices are too high and that he would have more to say about lowering costs this week. David Turk, his deputy energy secretary, also said last week the administration can tap the Strategic Petroleum Reserve, or SPR, in coming weeks and months as necessary to stabilize oil.

American Petroleum Institute (API) Weekly Inventories Report on Tap

At 20:30 GMT, the API is expected to report on the supply side. U.S. crude oil stocks were expected to have risen for a second consecutive week and are estimated to have increased by 1.6 million barrels in the week to Oct. 14, a preliminary Reuters poll showed on Monday.

Last week, prices fell after the API reported a large build for crude oil of 7.054 million barrels. The build in crude oil inventories was made possible by the Department of Energy’s release of 7.7 million barrels from the SPR in the week-ending October 7, leaving the SPR with 408.7 million barrels.

Daily Forecast

The daily fundamentals are primarily bearish but the market is also being underpinned by a weaker U.S. Dollar, which may be generating some foreign buying. Since late September, the market has also been supported by OPEC+’s decision to cut production by about 2 million barrels per day.

The markets could stabilize on technical support at $90.95 for Brent and $84.02 for WTI until the API data is released at 20:30 GMT. The results of that report could determine the direction of the markets into the close.