Oil Price Fundamental Daily Forecast – Thin-Markets Underpinned by Higher Demand for Risky Assets

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Friday shortly after the regular session opening. The move is being fueled by stronger demand for risky assets after U.S. stock index futures soared to limit up in the pre-market session.

There is also a little growing optimism that demand in Asia, especially from China, may start to pick up over the near-term as the number of new coronavirus cases in the country starts to decline.

At 12:51 GMT, May WTI crude oil futures are trading $33.91, up $1.93 or +6.04%. June Brent crude oil is trading $37.12, up $1.92 or +5.45%.

Despite today’s strength, the markets are expected to finish the week with their worst performance since the 2008 financial crisis. Concerns continue to be driven by global demand worries and production increases from several OPEC members.

U.S. Energy Information Administration Weekly Inventories Report

U.S. crude oil stockpiles rose more than expected last week, but gasoline and distillate inventories fell sharply amid low refinery rates, the EIA said on Wednesday.

Crude inventories rose 7.7 million barrels in the week to March 6, compared with analysts’ expectations in a Reuters poll for an increase of 2.3 million barrels.

Gasoline stocks fell 5 million barrels, double analysts’ forecasts. Distillate stockpiles, which include diesel and heating oil, dropped 6.4 million barrels, versus expectations for a 1.9 million-barrel drop, the EIA data showed.

Analysts said the divergent path of crude and product inventories was due to relatively low refining utilization rates, currently at 86.4% of total nationwide capacity and about on par with the last two years.

Daily Forecast

It looks as if demand for risky assets will be the catalyst underpinning crude oil prices on Friday. However, gains are likely to be limited. Due to below average volume, prices can be easily manipulated by the headlines so be prepared for two-sided trading and heightened volatility.

No one is expecting Russia and Saudi Arabia to end their price war soon so the markets are likely to remain rangebound over the near-term. Some traders expect WTI to straddle $30 a barrel until coronavirus demand concerns work their way through the markets.

Traders also expect U.S. Energy companies to cut investment and drilling plans because of plunging prices. These moves will eventually be supportive as global supply drops.

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.