Oil Fundamental Forecast – December 22, 2016

U.S. West Texas Intermediate and North Sea Brent crude oil closed lower on Wednesday after the U.S. government reported a surprise build in crude inventories last week.

March WTI Crude Oil finished the session at $53.38, down $0.81 or -1.49%. March Brent Crude Oil closed at $55.22, down $0.80 or -1.43%.

According to the U.S. Energy Information Administration crude oil inventories rose 2.3 million barrels in the week ended December 16. Analysts were looking for a 2.5 million barrel draw down.

The unexpected build was blamed on a hike in refinery output. Gasoline stocks distillate inventories fell.

The EIA report completely diverged from Tuesday’s report from the American Petroleum Institute that showed a larger than expected draw of 4.1 million barrels.

In other news, Russian Energy Minister Alexander Novak said Russia’s 2016 oil output is expected to total 547.5 million tonnes (11 million barrels per day, a 2.5 percent increase from the previous year.

Forecast

Despite Wednesday’s reversal to the downside, I expect a sideways trade today with a slight bias to the downside. Traders may have overreacted to the EIA report, which in my opinion, was a mixed bag.

Furthermore, trading volume dropped on Wednesday and if this trend continues then the chances for a rangebound market will increase. Traders have to be aware of potential volatility spikes due to headline news.