Oil Price Fundamental Daily Forecast – Extending Losses after EIA Reports Larger-than-Expected Inventory Build

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are drifting lower on Wednesday, shortly before the release of the U.S. Energy Information Administration’s (EIA) weekly inventories report at 15:30 GMT. The market is also giving back earlier gains that were fueled by short-covering and profit-taking in reaction to late Tuesday’s bullish American Petroleum Institute’s (API) weekly inventories report.

At 15:26 GMT, March WTI crude oil is trading $53.11, down $0.37 or -0.68% and April Brent crude oil is at $58.66, down $0.15 or -0.26%.

The catalysts behind the selling are worries about the impact of the coronavirus on demand. However, reports that OPEC and its allies could extend its production cuts beyond March are helping to underpin prices.

Corona Virus Update

The economic fallout over the coronavirus’ impact on China’s economy is continuing on Wednesday. Investors are making price adjustments to commodities ranging from crude oil to copper and iron ore. Airline fuel prices in particular have been hit the hardest.

British Airways suspended all direct flights to and from mainland China after Britain warned against all but essential travel to the country, and jet fuel demand has slumped in Asia as airlines have cancelled connections.

OPEC+ Wants to Extend Oil Production Cuts

According to sources, OPEC and its allies including Russia want to extend oil production cuts until at least June from March, and may deepen the reductions, should demand for oil in China be significantly reduced by the spread of the virus.

American Petroleum Institute Reports Drawdown

Late Tuesday, the API reported that crude oil inventories fell by 4.3 million barrels the week-ending January 24. Traders were looking for a gain of 482,000 barrels.

Gasoline stocks were up by 3.3 million barrels, compared with forecasts in a Reuters poll of a 1.3 million-barrel gain. Distillate fuel inventories, which include diesel and heating oil, fell by 141,000 barrels, against expectations of a 1 million barrel drop.

BREAKING NEWS

WTI and Brent crude oil futures are extending earlier losses on Wednesday after weekly data from the EIA revealed that U.S. crude oil inventories rose by 3.5 million barrels during the week-ended January 24. Traders were looking for a 700,000-barrel increase.

The EIA report also showed gasoline supply rose by 1.2 million barrels versus a 1.7 million barrel increase estimate. Distillate stocks fell by 1.3 million barrels. Traders were looking for a draw of 1.6 million barrels.