Oil Price Fundamental Daily Forecast – API Reports Smaller-Than-Expected Crude Oil Draw

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures settled lower on Tuesday as investors used the stronger dollar as an excuse to book profits after Monday’s steep run-up in prices. Traders also reacted to a report calling for increased U.S. production next year.

December WTI crude oil settled at $57.20, down -0.15 or -0.26% and January Brent crude oil finished the session at $63.69, down 0.58 or -0.90%.

The U.S. Energy Information Administration forecast domestic production in 2018 to rise by more than previously expected.

In its monthly short-term energy outlook, the agency forecast that U.S. crude oil will rise by 720,000 barrels per day (bpd) to 9.95 million bpd in 2018. Last month, it expected 680,000 bpd year-over-year increase to 9.92 million bpd.

Tension between Saudi Arabia and Iran and the geopolitical events involving the Saudi crown prince and his quest for power continued to underpin the market. Monday’s rally was driven by short-term speculation in response to these events.

The longer-term picture continues to look bullish with strong hedge fund longs supporting the markets due to expectations that the OPEC-led coalition would extend its program to cut production, trim the global supply glut and stabilize prices beyond the March 2018 deadline.

Forecast

WTI and Brent crude oil futures are trading lower early Wednesday in response to yesterday’s potentially bearish technical closing price reversal top. WTI crude oil will confirm the chart pattern with a sustained move under $56.83. Brent crude oil’s confirmation will take place if $63.49 is taken out with conviction.

The chart pattern does not mean the trend is changing to down, but it may be an indication that the selling is greater than the buying at current price levels and that the market may be ripe for a 2 to 3 day correction.

Near the close on Tuesday, the American Petroleum Institute (API) reported a draw of 1.562 million barrels in U.S. crude oil inventories for the week-ending November 3. This fell short of the 2.7 million barrel estimate.

According to the API, gasoline inventories showed a small build of 520,000 barrels for the week-ending November 3. Traders were looking for a draw of 2.25 million barrels. Distillate inventories declined 3.133 million barrels against a forecast of a drop of 1.85 million barrels.

On Wednesday at 1530 GMT, the U.S. Energy Information Administration will release is inventories data for the week-ending November 3. It is expected to show a drawdown of 2.5 million barrels.

Look for a possible sell-off today if WTI crude fails to hold $56.83 and Brent fails at $63.49.