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Oil Price Fundamental Daily Forecast – Bearish EIA Report Could Spike Prices Lower

By:
James Hyerczyk
Published: Mar 6, 2019, 11:51 UTC

The market is likely to trade in a tight range until the release of today’s U.S. Energy Information Administration report on crude oil inventories at 15:30 GMT. The report is expected to show a build of 1.2 million barrels. Estimates may change ahead of the report, given the API figures.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading flat-to-lower on Wednesday, shortly before the regular session opening. Prices are being pressured by a build in weekly U.S. crude stockpiles and bullish output forecasts by two big U.S. producers. Somewhat off-setting this news were the OPEC-led production cuts.

At 11:28 GMT, April WTI crude oil is trading $56.09, down $0.46 or -0.81%. May Brent crude oil is at $65.79, down $0.07 or -0.11%.

The tight trading range the past two days suggests investor indecision and impending volatility. The likely means traders are waiting for either fresh news regarding U.S. – China trade relations, or today’s U.S. Energy Information Administration weekly inventories report. Some traders suggest that crude oil has become an event-driven market, which is adding to the volatility.

Increased U.S. Production

On Tuesday, Chevron Corp. and Exxon Mobil Corp. released rival Permian Basin projections pointing to increased shale oil production.

The report went on to say that a jump in production from these areas would solidify the two producers as the dominant players in the West Texas and New Mexico field. Furthermore, one-third of Permian production could potentially remain under their control within five years.

API Report Shows Unexpected Inventories Build

According to the American Petroleum Institute (API), U.S. crude inventories jumped by 7.3 million barrels in the week-ending March 1 to 451.5 million. This was higher than the 1.2 million barrel forecast. Additionally, crude stocks at the Cushing, Oklahoma futures delivery hub rose by 1.1 million barrels.

The API report also showed a draw in gasoline inventories for the same time period in the amount of 391,000 barrels. Analysts had forecast a draw of 1.97 million barrels for the week. Distillate inventories decreased this week by 3.1 million barrels, compared to an expected draw of 975,000 barrels.

Daily Forecast

The market is likely to trade in a tight range until the release of today’s U.S. Energy Information Administration report on crude oil inventories at 15:30 GMT. The report is expected to show a build of 1.2 million barrels. Estimates may change ahead of the report, given the API figures.

A smaller-than-expected build or a drawdown could trigger a short-covering rally, however, uncertainty over U.S.-China trade relations could help limit gains.

A larger-than-expected build is likely to put further pressure on WTI and Brent crude oil prices, while threatening to change the trend to down on the daily charts.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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