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Vladimir Zernov
WTI Crude Oil

Oil Video 18.11.20.

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Crude Inventories Increase By 0.8 Million Barrels

EIA has just released its Weekly Petroleum Status Report which indicated that crude inventories increased by 0.8 million barrels. Earlier, API Crude Oil Stock Change Report estimated that inventories increased by 4.17 million barrels, but the market will traditionally give more weight to EIA data.

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Meanwhile, gasoline inventories increased by 2.6 million barrels while distillate fuel inventories decreased by 5.2 million barrels.

Oil has recently made an attempt to settle above the $42 level on vaccine-related optimism but lost momentum and declined below this resistance level. While EIA inventory report looks more encouraging than API Crude Oil Stock Change Report, traders will likely focus on vaccines and their potential to boost oil demand in the upcoming months.

It should be noted that U.S. domestic oil production has increased from 10.5 million barrels per day (bpd) to 10.9 million bpd, contributing to the increase in inventory levels.

At this point, it looks like demand is robust enough to absorb an increase in domestic oil production, but it remains to be seen whether the market is ready to deal with domestic production at levels above 11 million bpd.

EIA Believes That U.S. Crude Oil Production Will Stay Mostly Flat In 2021

Interestingly, EIA believes that U.S. crude oil production will remain near its current levels until the end of 2021. This is a rather surprising view given the robust increase in the number of U.S. oil rigs which happened in recent weeks.

If the U.S. domestic oil production stays near current levels in 2021, inventories will have a chance to decline materially since demand will surely increase amid mass vaccination.

Despite its forecast regarding future production levels, EIA believes that WTI oil price will average just $43 per barrel in the first half of 2021. Currently, the $43 level serves as a major resistance for oil, and EIA expects that the price of oil will not be able to get far away from this level.

In my opinion, the WTI oil price forecast looks rather conservative if we assume that U.S. production does not increase above 11 million bpd in 2021 while transportation demand rebounds.

In the near-term, oil will continue to feel the pressure from European lockdowns and the challenging virus situation in the U.S., but the longer-term picture is improving thanks to the recent developments on the vaccine front.

For a look at all of today’s economic events, check out our economic calendar.

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