Oil Price Fundamental Daily Forecast – API Report Expected to Show Another Drop in Stockpiles

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Tuesday shortly after the regular session opening. Prices are retreating on profit-taking as speculators reconsidered the likelihood of Middle East supply disruptions in the wake of the U.S. airstrike on Friday that killed a top-ranking Iranian Major General.

At 13:01 GMT, February WTI crude oil is at $62.70, down $0.57 or -0.90% and March Brent crude oil is at $68.20, down $0.71 or -1.05%.

Here’s what’s going on in a nutshell. Prices rose sharply on Friday and early Monday after Friday’s incident with the airstrike. The move was driven by speculation that the conflict between the United States and Iran would escalate enough to cause a disruption in the world’s oil supply.

“The market’s clearly worried about the potential for supply disruptions but there’s no obvious path forward from here,” said Lachlan Shaw, ahead of commodity research at National Australia Bank.

“It’s all a matter of scenarios that may impact oil production or not, so the market seems to have recalibrated in the last 24 to 36 hours on some of those likelihoods.”

The price action suggests those fears have been reduced and perhaps Iran will focus on military targets rather than oil production targets.

Furthermore, there is still an oil surplus so unless speculators actually see oil facilities and oil tankers being attacked, or even fires in the oil fields, gains are likely to be limited. We saw a similar move in September after Iran attacked Saudi oil production facilities. Basically, no spilled oil, no rally.

Despite the setback, the market continues to be supported by the hope that the U.S.-China trade deal will lead to increased global demand, and the deeper OPEC+ production cuts that began on January 1.

Daily Forecast

Unless there is a retaliation from Iran on Tuesday, traders will be primarily focused on today’s American Petroleum Institute (API) weekly inventories report and Wednesday’s report from the U.S. Energy Information Administration (EIA).

U.S. crude oil stockpiles likely dropped the week-ending January 3 for a fourth week in a row as exports ramped up although refined products stocks were expected to rise, a Reuters poll showed on Monday.

Six analysts estimated, on average, that crude stocks fell by 4.1 million barrels in the week to January 3.