Oil Price Fundamental Daily Forecast – Balancing Act Continues with Bulls Waiting for Trade Deal

U.S. West Texas Intermediate and international-benchmark Brent crude oil are trading higher on Thursday. There is no particular event driving prices higher. However, based on yesterday’s recovery from early session weakness following the release of the U.S. Energy Information Administration weekly inventories report, traders could be reacting to an increase in demand for U.S. gasoline.

At 10:26 GMT, April WTI crude oil is trading $56.62, up $0.40 or +0.71%. May Brent crude oil is at $66.62, up $0.63 or +0.95%.

U.S. Energy Information Administration

On Wednesday, the Energy Information Administration (EIA) reported that U.S. crude supplies rose by 7.1 million barrels during the week-ending March 1. That was more than the 1.9 million barrel increase, forecast by analysts. The jump in inventories brought total inventories up to 452.93 million barrels. Additionally, U.S. crude oil production remained at a record 12.1 million bpd, and increase of more than 2 million bpd since early 2018.

Supplies of gasoline fell by 4.2 million barrels, while distillates edged down by 2.4 million barrels last week, according to the EIA. Traders were looking for gasoline inventories to decline by 2 million barrels and distillate inventories to fall by 1.4 million barrels.

Production Cuts and Sanctions

Continuing to provide most of the support for the crude oil market is the OPEC-led production cuts which are taking about 1.2 million barrels per day from supply. Prices are also being underpinned by U.S. sanctions against Iran and Venezuela.

Fresh news out of Venezuela shows that Venezuela’s state-run oil firm PDVSA this week declared a maritime emergency, citing trouble accessing tankers and personnel to export its oil amid the sanctions.

Low Demand Issues

On Wednesday, the Organization of Economic Co-Operation & Development (OECD) said on Wednesday the world economy would grow 3.3 percent in 2019, down 0.2 percentage points from the QECD’s last set of forecasts in November.

Daily Forecast

Prices are rebounding on Thursday, but remain rangebound as investors await further developments over the U.S.-China trade deal. In the meantime, prices are being supported by the OPEC-led production cuts and sanctions against Iran and Venezuela. However, prices are being capped by rising U.S. production and expectations of lower demand.

The market is essentially being supported by an expectation that the global oil market will remain in balance during Q1 and move to a slight deficit in Q2. However, U.S. production could jump if prices rises. Therefore, we’re likely to see a balancing act taking place between OPEC and the U.S. moving forward. The wildcard remains the U.S.-China trade deal. If this occurs in a timely manner then prices could rise because of expectations of future demand.