Oil Price Fundamental Daily Forecast – API Reports Surprise Inventories Build Creating Uncertainty

U.S. West Texas Intermediate and international-favorite Brent crude oil closed lower on Tuesday after giving up all of its earlier gains. The rally in WTI crude oil stopped just short of last week’s high at $69.55 before the sellers came into the market. Brent, however, posted a new multi-year high before forming a potentially bearish technical closing price reversal top.

On Tuesday, June WTI crude oil settled at $67.70, down $0.94 or -1.37% and June Brent crude oil finished the session at $73.86, down $0.85 or -1.14%.

There were no major shifts in the fundamentals on Tuesday with traders blaming some of the loss on profit-taking related to the steep drop in U.S. equity prices. Some traders also raised concerns over rising U.S. fuel inventories and production.

Forecast

Crude oil futures are trading lower early Wednesday as investors show their reaction to yesterday’s dramatic reversal down and to a private industry report showing a slight rise in U.S. inventories.

At 0655 GMT, June WTI crude oil is trading $67.60, down $0.10 or +0.17% and June Brent crude oil is at $73.79, down $0.07 or -0.09%.

Late Tuesday, the American Petroleum Institute (API) reported a surprise build of 1.099 million barrels of U.S. crude oil inventories for the week-ending April 20. Analysts were looking for a draw of between 1.047 and 2.648 million barrels.

The API also reported a draw for gasoline inventories for the week-ending April 20, in the amount of 2.724 million. Analysts were looking for a draw of 995,000 barrels.

Distillate inventories also posted a draw last week of 1.911 million barrels. Analysts had forecast a slightly smaller decline of 807,000 barrels.

Uncertainty has entered the market place with the decision on the reimposition of sanctions on Iran less than a month away and traders not sure what to expect from today’s U.S. Energy Information Administration’s weekly inventories due to the surprise API number. The latest estimate calls for a 1.6 million barrel draw, but that could change.

Just 24 hours ago, WTI crude was in a position to break out to the upside on the daily chart, but yesterday’s selling momentum has put it in a position to challenge the last swing bottom at $67.14. A trade though this level will change the trend to down on the daily chart.

Also the divergence yesterday between WTI and Brent crude suggests the fundamental traders may be ahead of the market. This could also be a sign that a correction is coming.