Oil Price Fundamental Daily Forecast – API Reports Bigger-than-Expected Build, EIA report on Tap

Sentiment seems to have flipped in crude oil over the past week. After holding on to a bullish outlook for a several months, investors have become worried about the long-term outlook for prices.
James Hyerczyk
Crude Oil
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures settled mixed on Tuesday, supported by a weaker U.S. Dollar, which led to increased demand for the dollar-denominated commodity. Gains were limited, however, and the markets pressured by concerns over supply.

March WTI crude oil futures settled at $59.19, down $0.10 or -0.17% and April Brent crude oil finished at $62.72, up $0.13 or +0.21%.

Daily March WTI Crude Oil

Since the stock market began declining sharply early this month, oil prices have erased this year’s gains amid a volatile stock market environment.

In other news, the Paris-based International Energy Agency said global oil supply would outstrip demand this year, prompting fears that efforts to reduce inventories would fall short of expectations. The IEA also revised its global demand forecast upward by 7.7 percent. Still, rising production, particularly from the United States may outweigh demand gains.

Additionally, the U.S. Energy Information Administration said last week that U.S. oil production is expected to surpass 11 million barrels per day in late 2018, a year earlier than projected last month.

Finally, seasonal refinery maintenance may be pressuring prices.

Daily April Brent Crude

Forecast

Early Wednesday, oil prices are recovering from a lower opening in response to a weaker U.S. Dollar and stable stock prices. Prices were pressured late Tuesday/early Wednesday after the American Petroleum Institute (API) reported a build of 3.947 million barrels of United States crude oil inventories for the week ending February 9, according to the API data. Analysts were looking for a smaller build of 2.825 million barrels in crude oil inventories.

The API also reported a larger than expected gasoline build of 4.634 million barrels. Analysts had expected a small 1.229-million-barrel build.

Distillate inventories saw a modest increase this week of 1.1 million barrels. Analysts had forecast a decline of 1.130-million-barrels.

Sentiment seems to have flipped in crude oil over the past week. After holding on to a bullish outlook for a several months, investors have become worried about the long-term outlook for prices. During the week-ending February 2, the EIA said U.S. production came in at 10.251 million barrels per day.

This was followed up by yesterday’s IEA report which painted a grim picture for oil prices that shows U.S. production growth outstripping demand growth.

Due to short-term oversold technical conditions, a weaker dollar and stable stock prices, crude oil may be ripe for a short-covering rally. However, sellers are likely to stop the move and may initiate new short positions if they believe the IEA report and that OPEC may have to alter its strategy to stabilize prices and regain control of supply.

Today’s U.S. Energy Information Administration’s weekly inventories report is expected to show a 2.8 million barrel build.

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