Oil Price Fundamental Daily Forecast – Bullish Jobs Report Could Raise Hope for Increased Demand

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sideways to higher on Friday as speculators continue to try to establish support after dumping risky long positions as the threat of war in the Middle East receded and investors expressed concerns over rising U.S. inventories.

However, although the risk premium is being stripped from the market, it continues to be underpinned by the hope that the new trade deal between the United States and China would lead to global demand growth. Furthermore, traders are hoping the deeper production cuts by OPEC and its allies would offset some of the increase in U.S. output.

At 12:09 GMT, February WTI crude oil is trading $59.61, up $0.05 or +0.09% and March Brent crude oil is at $65.47, up $0.09% or +0.14%.

U.S. Energy Information Administration Weekly Inventories Report

U.S. crude oil stockpiles rose unexpectedly last week and gasoline inventories surged by their most in a week in four years, the Energy Information Administration (EIA) said on Wednesday. The report offset Tuesday’s slightly bullish numbers released by the American Petroleum Institute (API).

The EIA reported that crude inventories rose by 1.2 million barrels in the week-ended January 3 to 431.10 million barrels, compared with analysts’ expectations in a Reuters poll for a 3.6 million-barrel drop.

U.S. gasoline stocks surprised as well, rising by 9.1 million barrels in the week to 251.6 million barrels, compared with expectations in a Reuters poll for a 2.7 million-barrel rise. That was the largest one-week gain in gasoline inventories since January 2016. Gasoline supplied over the last four weeks was 0.4% lower than the same period a year ago due to weak demand.

American Petroleum Weekly Inventories Report

Late Tuesday, the API reported a large crude oil inventory draw of 5.95 million barrels for the week-ending January 3, compared to analyst expectations of a smaller 4.10 million-barrel draw in inventory.

The API also reported a huge build of 6.70 million barrels of gasoline for the week-ending January 3, threatening to erase any price gains in crude oil due to the larger than expected draw. Traders were looking for gasoline inventories to increase by 2.654-million barrels for the week.

Distillate inventories saw a build of 6.40 million barrels for the week, while Cushing inventories fell by 1.0 million barrels.

Daily Forecast

Today’s U.S. Non-Farm Payrolls report, due to be released at 13:30 GMT, could move the markets higher if it continues to show a strengthening labor market. This would lead to increased hope for demand.

Fundamentally, if you look at the API and EIA data, gasoline supply is growing. This could lead to a back-up in crude supply until this issue is taken care of. This could keep a lid on any rally.

Technically, the long-term pivot price is $58.91. The market could straddle this level for weeks. The key level to watch for Brent crude is $66.51.