U.S. West Texas Intermediate crude oil is trading higher on Friday, but down for the week. Thursday’s steep drop also wiped out most of market’s monthly gain. Although the foundation is there for higher prices before the end of the year, the short-term outlook is a little bleak, suggesting we could be headed for weeks of sideways price action.
After hitting a four-month high on July 21, the price action toward the end of this week clearly shows that investors are becoming more concerned about demand. One might suggest that prices would be a lot lower had it not been for a plunge to two-year lows by the U.S. Dollar. A falling dollar tends to increase foreign demand for dollar-denominated crude oil.
Meanwhile, a Reuters poll released on Friday showed that oil prices are set for a slow crawl upward this year as the gradual easing of coronavirus-led restrictions buoy demand, while a potential second COVID-19 wave could slow the pace of recovery.
The survey of 43 analysts and economists forecast benchmark Brent crude to average $41.50 a barrel in 2020, up slightly from the $40.41 consensus in last month’s survey and compared with around $42 average for the benchmark thus far this year. It is expected to average $49.85 in 2021.
The 2020 outlook for West Texas Intermediate rose to $37.51 per barrel from June’s $36.10.
The poll projected global demand to contract by between 7.2 and 8.5 million barrels per day (bpd) this year, versus…