WTI and Brent Crude Oil

Oil Price Fundamental Daily Forecast – Gains Capped by Persistent COVID-19 Related Concerns

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading steady-to-lower on Thursday as traders try to balance the bullishness of the latest government inventories report with COVID-related demand issues.

Today’s early declines are being fueled by fresh travel curbs to prevent new coronavirus outbreaks and delays to vaccine rollouts. A stronger U.S. Dollar is also dampening demand for dollar-denominated crude oil as well as uncertainty over the Biden Administration’s $1.9 trillion coronavirus relief package.

Traders are also worried that volatility in the stock market could force hedge funds to sell crude oil to meet stock market margin calls and to cover losses.

At 12:16 GMT, March WTI crude oil futures are trading $52.75, down $0.10 or -0.19% and March Brent crude oil is at $55.76, down $0.05 or -0.09%.

US Energy Information Administration Weekly Inventories Report

According to the EIA, U.S. crude oil stockpiles fell by nearly 10 million barrels the week-ending January 22 to their lowest since March 2020.

The unexpected 9.9 million-barrel decline, the biggest draw since July, reduced crude inventories to 476.7 million barrels, according to EIA figures. Analysts’ expectations in a Reuters poll were for a 430,000-barrel rise.

The decline was the result of a sharp falloff in imports and a 2.3 million-barrel drawdown in stocks at the Cushing, Oklahoma, delivery hub for crude futures.

Net U.S. crude imports fell by 2.1 million barrels per day, the EIA said.

Refinery crude runs fell by 39,000 bpd, while refinery utilization rates fell by 0.8 percentage points last week, the EIA said.

U.S. gasoline stocks rose by 2.5 million barrels to 247.7 million barrels, the EIA said, compared with expectations for a 1.8 million-barrel rise.

Distillate stockpiles, which include diesel and heating oil, fell by 815,000 barrels in the week, versus expectations for a 361,000-barrel drop.

Daily Forecast

Traders seem to be shrugging off the EIA data, which represents the past and focusing on future demand.

Demand in Europe and Asia is especially being monitored as contagious variants of the coronavirus drive a rise in COVID-19 infections and a slower rollout of vaccines in Europe and travel curbs in China are expected to limit fuel consumption.

We could see some short-term weakness, but bullish traders seem to be convinced that the OPEC+ production cuts are likely to continue to provide longer-term support.

The biggest fear for traders should be long-liquidation by hedge funds to meet stock market margin calls and to cover losses.

For a look at all of today’s economic events, check out our economic calendar.

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.