WTI and Brent Crude Oil

Oil Price Fundamental Daily Forecast – Vulnerable to Profit-Taking Ahead of March 4 OPEC+ Meeting

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher early Thursday after testing the highest levels in more than 13 months. The catalysts behind the strength are an assurance from Federal Reserve Chair Jerome Powell that U.S. interest rates will stay low, and a sharp drop in U.S. crude output last week due to the storm in Texas.

At 10:22 GMT, April WTI crude oil is trading $63.46, up $0.24 or +0.38%. This is down from an intraday high of $63.79. May Brent crude oil is at $66.50, up $0.32 or +0.48%. The high of the session is $66.81.

Dovish Fed Helps Underpin Prices

An assurance from the U.S. Federal Reserve that interest rates would stay low for a while weakened the U.S. Dollar, while boosting investors’ risk appetite and global equity markets.

Federal Reserve Chair Powell reiterated on Wednesday that U.S. interest rates will remain low and the Fed will keep buying bonds to support the U.S. economy. The Fed’s commitment to low rates has some investors worried that inflation could spike on passage of further fiscal stimulus.

Powell’s comments also weakened the U.S. Dollar, which came as a surprise because of a broader rise in U.S. Treasury yields. Benchmark 10-year borrowing costs are holding near their highest in nearly a year. A weaker greenback tends to drive up foreign demand for dollar-denominated crude oil.

Weekly US Energy Information Administration Weekly Inventories Report

U.S. crude oil production dropped by more than 1 million barrels per day last week during Texas’ deep freeze, equaling the largest weekly fall ever, and refining runs tumbled to levels not seen since 2008, the Energy Information Administration said on Wednesday.

Crude Inventories rose by 1.3 million barrels in the week to 463 million barrels, compared with analysts’ expectations in a Reuters poll for a 5.2 million-barrel drop.

Crude stocks at the Cushing, Oklahoma delivery hub rose by 2.8 million barrels.

U.S. gasoline stocks rose by 12,000 barrels to 257.1 million barrels, compared with expectations for a 3.1 million-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell by 5 million barrels in the week to 152.7 million barrels, versus expectations for a 3.7 million-barrel drop, the EIA data showed.

Daily Forecast

“Comments from Fed Chairman, Jerome Powell, earlier in the week relating to the need for monetary policy to remain accommodative have probably helped, but sentiment in the oil market has also become more bullish, with expectations for a tightening oil balance,” ING analysts said in a note.

However, we could start seeing some profit-taking and position-squaring as we approach the March 4 OPEC+ meeting date. The group is expected to discuss a modest easing of oil supply curbs from April given a recovery in prices.

Prices are higher than they were when the pandemic started in March 2020 but demand hasn’t reached its pre-pandemic levels so the market is well ahead of the fundamentals which makes it vulnerable to a short-term setback.

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.