WTI and Brent Crude Oil

Oil Price Fundamental Daily Forecast – Price Action, Technical Pattern Indicate Bullishness May Be Easing

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching lower on Thursday as upbeat Chinese import data and U.S. crude oil draws were outweighed by surging cases in Europe and new lockdowns in China. A potentially bearish technical chart pattern is also limiting gains and encouraging investors to trim their bullish positions, setting up the market for its first correction in weeks.

At 13:40 GMT, March WTI crude oil futures are trading $52.59, down $0.37 or -0.70% and March Brent crude oil is at $55.47, down $0.59 or -1.05%.

Early Support from Strong China Imports

Supporting prices, China’s total crude oil imports rose 7.3% in 2020 despite the coronavirus shock, with record arrivals in the second and third quarters as refineries expanded operations and low prices encouraged stockpiling, customs data showed.

US Government Reports Another Bullish Draw

The market is also being underpinned by another reported drawdown in U.S. crude oil stockpiles, though gasoline and distillate inventories rose as refiners ramped up output to the highest level since August, the Energy information Administration said on Wednesday.

Crude inventories fell by 3.2 million barrels in the week to January 8 to 482.2 million barrels, compared with expectations in a Reuters poll for a 2.3 million-barrel drop. U.S. gasoline stocks rose by 4.4 million barrels in the week to 245.5 million barrels, compared with expectations for a 2.7 million-barrel rise. Distillate stockpiles rose by 4.8 million barrels in the week, versus expectations for a 2.7 million-barrel rise.

Refinery crude runs rose by 274,000 barrels per day in the last week, the EIA said. Refinery utilization rates rose by 1.3 percentage points, in the week, boosting overall refining use to 82% of capacity, highest since August.

Bearish Signs Emerging

Reuters reported that Brent’s six-month backwardation, whereby contracts for later delivery are cheaper, fell to its lowest level in since January 5, indicating bullish sentiment is easing.

Meanwhile, China, the world’s second-largest oil consumer, reported its biggest daily jump in new COVID-19 cases in more than 10 months as infections in a northeastern province nearly tripled.

Short-Term Outlook

One piece of good news is that refiners are starting to ramp up production of products, however, fuel demand remains low, with the four-week average of gasoline product supplied down 11% from the year-earlier period. Consumers continue to use less fuel as they restrict their movements due to coronavirus.

Additionally, oil producers face an unprecedented challenge balancing supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, said an official at the International Energy Agency (IEA).

The markets are probably overdue for a correction, which could be what the technical chart pattern is indicating. A decent 2 to 3 day break would alleviate some of the upside pressure.

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.