Crude Oil

Oil Price Fundamental Daily Forecast – EIA Report Expected to Show 2.9M Build

U.S. West Texas Intermediate and international-benchmark crude oil futures are trading mixed on Thursday after surging to their highest levels since late November on Wednesday. After an early session slump, prices rebounded yesterday, hitting their highest levels of the year, on the hopes that the market will balance later this year.

At 08:57 GMT, April WTI crude oil is trading $57.22, up $0.07 or +0.14% and April Brent crude oil is at $67.07, down $0.01 or 0.01%.

Driving prices higher is OPEC and its ally’s quest for a balanced market. Saudi Energy Minister Khalid al-Falih said on Wednesday he hoped the oil market would be balanced by April and that there would be no gap in supplies due to the U.S. sanctions on OPEC members Iran and Venezuela.

Supply Cut Driven Rally

Crude oil is being primarily underpinned by output cuts from top producers, as well as sanctions on OPEC members Iran and Venezuela. Secondary support is being provided by the hopes of a trade deal between the United States and China, and a strong rally in the equity markets.

Additional Help from Nigeria

On Wednesday, a spokesman for President Muhammadu Bhuari said in a statement that Nigeria is willing to reduce output to help secure higher prices. Nigeria made the announcement after being called out by Saudi Arabia because of its failure to adhere to the OPEC agreement to reduce production. In January, Nigeria pumped well above the quota it previously agreed to.

U.S. Production Slows Rally

Although the OPEC-led supply cuts are helping to trim the global supply overhang and stabilize prices, the current rally is being slowed by expectations of inventory builds in the United States amid surging shale production to record highs.

American Petroleum Institute Weekly Inventory Report

The API reported a build in crude oil inventory of 1.26 million barrels for the week-ending February 15. This came in under the 3.080 million barrel forecast.

The API also reported a draw in gasoline inventories for the same period in the amount of 1.55 million barrels. Analysts estimated a smaller draw in gasoline inventories of 350,000 barrels for the week.

Distillate inventories decreased this week by 758,000 barrels, compared to an expected draw of 1.691 million barrels.

Crude oil inventories at the Cushing, Oklahoma facility grew by 3.24 million barrels for the week.

Daily Forecast

The story remains the same. The OPEC-led supply cuts and the Venezuelan sanctions are working to trim supply and that is helping to support the rally. U.S. production continues to slow the rally and at times puts an actual cap on gains.

Thursday could be one of those days. Traders are looking for today’s U.S. Energy Information Administration’s inventories report to show a 2.9 million barrel build. A smaller than expected build will be bullish. A larger build will encourage profit-taking. The EIA report comes out at 16:00 GMT.

The wildcard remains a U.S.-China trade deal. Reaching a deal this week will be bullish for crude oil prices because it could lead to increased future demand.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.