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Oil Fundamental Forecast – March 22, 2017

By:
James Hyerczyk
Updated: Mar 22, 2017, 04:22 UTC

U.S. West Texas Intermediate and international Brent crude oil futures tumbled on Tuesday as investors shrugged off reports that OPEC was considering

Crude Oil

U.S. West Texas Intermediate and international Brent crude oil futures tumbled on Tuesday as investors shrugged off reports that OPEC was considering extending its program to cut output, trim the global supply and stabilize prices.

Even the cartel didn’t sound too convincing that such an extension would take place, citing that it wouldn’t move forward with the plan unless non-OPEC members were also onboard with the idea. This seems pretty remote considering that some, namely Russia, haven’t even lived up to their original obligations.

May WTI Crude Oil closed at $48.24, down $0.67 or -1.37%. June Brent Crude Oil ended the session at $51.19, down $0.60 or -1.16%.

Prices were also pressured by reports that Libya increased exports.

Brent Crude
Daily June Brent Crude Oil

Forecast

Prices are expected to be under pressure on Wednesday due to another bearish report from the American Petroleum Institute late Tuesday. According to the API, U.S. crude oil inventories rose by 4.5 million barrels in the week ending March 17 to 533.6 million.

This week’s report followed the relatively small draw of 0.53 million barrels last week and was above consensus forecasts for a build of around 2.5 million barrels on the week. Traders also said that this was the ninth API build in the last eleven weeks.

The API also reported that gasoline inventories recorded a draw of 4.93 million barrels after a draw of 3.88 million barrels last week while distillates registered a draw of 0.88 million barrels after a decline of 4.07 million barrels previously.

Most importantly, Cushing, Oklahoma, the main futures hub, recorded another substantial build of 1.97 million barrels for the week from 2.06 million previously.

Traders expect to see more pressure over the near-term because of the severe supply glut. The glut is the result of increased U.S. oil production that has risen over 8 percent since mid-2016 to more than 9.1 million barrels per day (bpd) to levels comparable in late 2014, when crude oil began its bear market.

WTI Crude Oil
Daily May West Texas Intermediate Crude Oil

Traders will be watching the March 14 bottom at $47.71 very carefully because if this price fails as support, the next downside target is the November 14, 2016 bottom at $45.78.

This price will likely be challenged if the U.S. Energy Information Administration issues another bearish report on Wednesday. Another build will push crude stocks to record highs. According to traders, the EIA report is expected to show a 1.9 million barrel increase in inventory.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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