Oil Price Fundamentals Daily Forecast – Rising Chinese imports help widen Brent/WTI spread

International benchmark U.S. West Texas Intermediate and Brent crude futures traded higher on Thursday on hopes of a timely end to the U.S.-China trade dispute and stronger-than-expected Chinese trade figures, which include crude oil imports exceeding forecasts. Brent crude continued to outperform WTI, hitting its highest level since Nov. 21, while the U.S. contract remained below its high since early February.

At 08:08 GMT, WTI April futures were trading at $54.84, up $0.54 or +0.99%, and April Brent crude was at $64.37, up $0 $.78 or +1.19%.

Most importantly, the spread between Brent crude and WTI crude has widened from a low of $6.80 on January 31 to a high of nearly $10.00. This is the result of a combination of OPEC-led production cuts and sanctions against Venezuelan exports, which are supporting Brent crude, and rising US production, which is helping to limit gains for WTI crude.

The optimism of transactions

Traders say positive talk of high-level trade talks between the U.S. and China underway in Beijing is helping to support prices as an end to the trade dispute should boost crude demand for the world’s second-largest economy.

I support the increase in imports from China

Today’s report on China’s trade balance also provides support for crude oil prices early Thursday. The report showed that China’s crude oil imports in January rose 4.8 percent from a year earlier to an average of 10.03 million barrels per day (bpd). This marked the third consecutive month that imports exceeded the 10 million bpd level.

US supply caps WTI gains

While news of rising imports from China was particularly bullish for Brent crude futures, news from the weekly US government inventories report was not particularly bullish for WTI crude oil prices.

According to the U.S. Energy Information Administration’s weekly inventories report for the week ended Feb. 8, U.S. crude oil inventories rose last week to the highest since November 2017 as refiners cut runs to the lowest level since October 2017.

Crude oil inventories built for a fourth straight week, rising 3.6 million barrels to 450.8 million barrels in the week to February 8. Traders were looking for a rise of 2.7 million barrels.

Daily forecast

In the short term, the crude oil market looks bullish, but as WTI and Brent futures approach the 50% retracement levels from the October highs to the December lows, the rally should stall. This is because the market is still oversupplied.

According to the International Energy Agency, the world oil market will struggle this year to absorb rapidly growing crude supplies from outside the Organization of the Petroleum Exporting Countries (OPEC), even with the group’s production cuts and US sanctions on Venezuela and Iran .

Moreover, the IEA said it expects global oil demand this year to rise by 1.4 million bpd, while non-OPEC supply will increase by 1.8 million bpd. This does not bode well for oil bulls in the long run.

This article was originally posted on FX Empire

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