Oil Fundamental Forecast: Bearish
- Crude oil prices[1] had best winning streak since February 2012 as Fed, trade talks boosted stocks
- Near-term gains in the sentiment-linked commodity may be in vain amidst China, US slowdown
- Revival in global growth bets needed to truly boost oil prices in long-term, for now watch data
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Crude oil prices extended gains as its winning streak approached its 9th day last week, the longest since February 2012. The sentiment-linked commodity reaped the benefits of improved market mood as the S&P 500[3] kept reversing losses after bottoming last month. The backdrop of optimism in financial markets seemed to have stemmed from US China trade talk hopes[4] and an increasingly cautious Fed[5].
While the winning streak is impressive, it pales in comparison to the declines seen towards the end of 2018 where it tumbled about 45%. As the commodity traded into last Friday, it only stood just below mid-December highs. It would probably take major shifts in fundamentals to drive crude oil back to the highs seen last year, and that seems fanciful at this moment in time.
Disappointing data from China (a concern noted by Fed Chair Jerome Powell) undermines market optimism. The nation is the world’s second largest consumer of oil according to the EIA[6]. The first is the US which is also seeing signs of slowing economic growth. Last week, Chinese auto sales fell by the most in a year in over two decades (-6%).
