Oil Price Fundamental Daily Forecast – EIA Report Expected to Deliver More Bearish News

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are plunging on Wednesday shortly before the release of the U.S. Energy Information Administration’s (EIA) weekly inventories report at 14:30 GMT.

Traders are blaming the weakness on persistent oversupply and demand destruction caused by the coronavirus pandemic-related lockdowns. Meanwhile, a bearish report from the International Energy Agency (IEA) also weighed on prices.

At 12:25 GMT, June WTI crude oil is trading $26.65, down $0.75 or -2.74% and June Brent crude oil is at $28.51, down $1.09 or -3.68%.

Bearish International Energy Agency Outlook

The IEA on Wednesday forecast a 29 million barrel per day (bpd) dive in April oil demand to levels not seen in 25 years and said not output cut could fully offset the near-term falls facing the market.

“There is no feasible agreement that could cut supply by enough to offset such near-term demand losses,” the IEA said in its monthly report. “However, the past week’s achievements are a solid start.’

American Petroleum Institute Reports Huge Inventory Build

Late Tuesday, the API released a report that showed another large crude oil inventory build of 13.143 million barrels for the week-ending April 10. Analysts were looking for a build of 11.676 million barrels.

The API also reported a build of 2.226 million barrels of gasoline for the week-ending April 10, after last week’s 9.445-million-barrel build. This week’s build compares to analyst expectations for a larger 6.386-million-barrel build for the week.

Distillate inventories were up by 5.640 million barrels for the week, compared to last week’s 177,000-barrel draw, while Cushing inventories saw a large gain of 5.361 million barrels.

Daily Forecast

The downside momentum could continue throughout the day with oil prices being driven lower by the bearish fundamentals and sharply lower U.S. equity prices. Meanwhile, the EIA report is expected to show a 12.1 million barrel build. This is a huge number but an even bigger figure in its report will likely crush prices.

The markets are going to have a difficult time sustaining any rally with traders given orders to sell rallies. Prices aren’t likely to stabilize on this leg down until Brent hits $20 per barrel. That would put the WTI futures contract at about $18 per barrel.