Oil Fundamental Forecast – February 23, 2017

U.S. West Texas Intermediate and international Brent crude oil finished lower on Wednesday but the market could find support early Thursday after data released by a private industry group showed a surprise drawdown in U.S. crude oil stocks. Another highlight of the report was a drop in imports, which suggests that the global supply glut may be ending.

April WTI crude oil futures closed at $53.59, down $0.74 or -1.36%. April Brent crude oil finished at $55.84, down $0.82 or -1.45%.

Forecast

Traders are looking for a firm trade on Thursday after a report by the American Petroleum Institute showed crude inventories fell by 884,000 barrels in the week-ended February 17 to 512.7 million barrels. Analysts were looking for an increaser of 3.5 million barrels.

Crude stocks at the Cushing, Oklahoma, futures delivery hub were down by 1.7 million barrels and U.S. crude imports fell last week by 1.5 million barrels per day (bpd) to 7.398 bpd, according to the API.

The API report also showed that refinery runs fell by 182,000 bpd, while gasoline stocks dropped by 893,000 barrels, mostly in line with expectations.

Although we expect to see a strong trade early, gains are likely to be capped going into the release of official data from the U.S. Energy Information Administration at 1600 GMT. (Note the new time).

Traders expect the EIA report to show a 3.4 million barrel draw during the week-ended February 17 although this estimate may change because of the API data.

If there is a divergence between the API and EIA reports then we could see a volatile reaction in the market.