Oil Price Fundamental Daily Forecast – Weak German PMI Data Raises New Concerns Over Demand

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Monday shortly before the regular session opening on concerns over demand after the release of weaker than expected PMI data from Germany. The move more than offset earlier gains that were fueled by elevated tensions in the Middle East.

At 10:37 GMT, November WTI crude oil futures are trading $57.71, down $0.38 or -0.65%. December Brent crude oil futures are at $62.93, down $0.27 or -0.43%.

Early in the session, crude oil was edging higher in reaction to the news that the Pentagon ordered additional troops to be deployed in the Gulf region to strengthen Saudi Arabia’s air and missile defenses following an attack on Saudi oil facilities.

U.S. Secretary of State Mike Pompeo said on Sunday that the troops are for “deterrence and defense” and Washington aimed to avoid war with Iran.

While the military activity in the Middle East may have provided an early price boost, news that the German private sector PMI shrank in September for the first time in over six years, wiped out earlier gains and turned the markets lower.

According to Reuters, “German private sector activity shrank for the first time in 6-1/2 years in September as a manufacturing recession deepened unexpectedly and growth in the service sector lost momentum, a survey showed on Monday.”

Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, fell to 49.1 to 51.7 in the previous month. Analysts were looking for a reading of 51.4.

“The economy is limping toward the final quarter of the year and, on its current trajectory, might not see any growth before the end of 2019,” Phil Smith from IHS Markit said.

“All the uncertainty around trade wars, the outlook for the car industry and Brexit are paralyzing order books, with September seeing the worst performance from the sector since the depths of the financial crisis in 2009.”

Daily Forecast

The weakness in the German economy could keep a lid on prices all session on Monday unless there are new concerns in the Middle East.

U.S. Flash Manufacturing PMI, due to be released at 13:45 GMT, could also influence the price action later in the day. Traders are looking for a reading of 50.3, unchanged from the previous month.

A lower than expected number could put further pressure on crude oil prices. A better than expected number could help erase current losses and turn prices higher.