WTI and Brent Crude Oil

Oil Price Fundamental Daily Forecast – Set Up for Short-Term Correction, but Bullish Factors Remain Intact

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Thursday after giving back earlier gains on profit-taking. The price action reflects the current early session theme of lower demand for riskier assets with stocks weakening along with commodity-linked assets, while money moves into the safe-haven Japanese Yen.

At 08:20 GMT, December WTI crude oil futures are trading $82.81, down $0.61 or -0.73% and December Brent crude oil is at $84.99, down $0.83 or -0.97%.

Although the markets may be entering a short-term correction mode, they remain well-supported for further upside action over the long-run. The absence of large increases in supply from the United States or OPEC is one reason to expect higher prices. The other is expectations of strong demand from the switch to fuel oil from coal and gas by power generators amid surging prices.

US Crude, Fuel Stocks Dip, Tightening Supply as Demand Remains Strong – EIA

U.S. crude and fuel inventories tightened further last week, as supplies of gasoline hit a two-year low and inventories at the largest U.S. commercial storage hub dropped to a three-year low, the Energy Information Administration (EIA) said on Wednesday.

Crude inventories fell by 431,000 barrels in the week to October 15 to 426.5 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.9 million-barrel rise.

U.S. gasoline stocks fell by a more-than-expected 5.4 million barrels in the week to 217.7 million barrels, the lowest since November 2019, the EIA said.

Distillate stockpiles, which include diesel and heating oil, fell by 3.9 million barrels, putting their stocks at their lowest levels since April 2020.

OPEC to Stay the Course

Crude oil prices have been bolstered for more than a year as supply has tightened, with the Organization of the Petroleum Exporting Countries (OPEC) maintaining a slow increase in supply rather than intervening to add more barrels to the market.

Last week, OPEC leader Saudi Arabia dismissed calls for speedier oil output increases, saying its efforts with allies were enough and protecting the oil market from the wild price swings seen in natural gas and coal markets.

OPEC and its allies have done a “remarkable” job acting as “so-called regulator of the oil market,” he said.

Daily Forecast

Crude oil could feel some light pressure on Thursday if the “risk-off” tone continues. The dollar could also recover from a week-long sell-off which could reduce foreign demand for dollar-denominated crude, at least over the short-run. But the move is not expected to last long or lead to a major change in trend. Instead, it will probably alleviate some of the upside pressure that could lead to a technically oversold market.

Additionally, futures contracts are currently in backwardation, where later-dated contracts trade at a lower price than the current contract. That encourages companies to sell oil immediately rather than keep it in storage.

It also prevents large build-ups of supply, which is bullish for crude prices.

With the longer-term trend pointing higher, the markets are likely to remain in the “buy the dip” mode for a while.

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.