Crude Daily Forecast – EIA Inventory Report Lifts Crude, All Eyes on OPEC

Crude has posted slight gains on Wednesday. Currently, U.S. crude oil is trading at $47.67, up $0.67 or 1.43% on the day. Brent crude oil is trading at $52.20, up $0.36 or 0.69%.

EIA Surplus Smaller than Expected

U.S. crude prices have moved higher on Wednesday, after the Dept. of Energy crude inventory report pointed to a small surplus of 0.8 barrels, well below the forecast of 2.8 million barrels. This is the third straight reading that the EIA surplus was significantly lower than the forecast.

OPEC+ Meeting Could Shake Up Prices

Oil will be in the spotlight on Thursday and Friday, as oil ministers from OPEC and non-OPEC countries gather for a key meeting in Vienna. On Tuesday, OPEC’s Joint Technical Committee proposed a production cut of 600,000-1 million barrels per day (bdp) for Q2 in order to lift sagging oil prices. This is significantly higher than its proposal just a month ago, which called for a reduction of 600,000 bpd. OEPC very much wants to cut supplies, but Russia remains the wildcard in the equation. Earlier this week, Moscow said that it did not have a problem with current prices. However, with some analysts projecting that oil could fall below $30 a barrel, Moscow may decide to back OPEC’s proposal to cut production.

The coronavirus outbreak has led to a collapse in demand for crude, and IHS Markit estimated on Wednesday that global oil demand in the first quarter will be 3.8 million barrels per day lower than a year earlier, marking the biggest quarterly drop ever recorded. If the oil ministers meeting in Vienna can reach an agreement, oil prices should remain steady, at least in the short term. However, if there is no deal, we can expect prices to fall lower and move closer to the symbolic $40 level.

Technical Analysis

The line of 47.50 was tested in resistance earlier in the day and remains a weak line. Above, there is resistance at 49.50, which is protecting the symbolic 50.00 level. This is followed by resistance at 51.50. On the downside, we find support at 45.92, followed by support at 43.55.