Oil Price Fundamental Daily Forecast – Extremely Low Cushing Inventories Nearing Panic Levels

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are under pressure on Thursday following an industry report that showed crude oil stockpiles rose more than expected and fuel inventories, including gasoline and distillates, unexpectedly increased last week in the United States, the world’s largest oil consumer.

At 09:24 GMT, December WTI crude oil futures are trading $83.21, down $1.44 or -1.70% and December Brent crude oil is at $85.22, down $1.18 or -1.37%.

Both markets are currently trading lower for the week, putting them in a position to post a potentially bearish closing price reversal top that could trigger the start of a 2 to 3 week correction.

American Petroleum Institute Weekly Inventories Report

The American Petroleum Institute (API) late Tuesday reported its fifth straight week of crude oil inventory builds. According to the API, U.S. crude oil inventories rose 2.318 million barrels. Analysts were looking for a build of 1.650-million barrels for the week.

U.S. crude inventories are still 61 million barrels below where they were at the beginning of the year with a persistent draw in Cushing inventories creating worries.

The API also reported a build in gasoline inventories of 530,000 barrels for the week-ending October 22 – compared to the previous week’s 3.5 million-barrel draw.

Distillate stocks saw an increase in inventories of 986,000 barrels for the week, compared to last week’s 3-million-barrel decrease.

Hot Topic:  Steep Drop in Cushing Inventories Levels

Crude oil tanks at the Cushing, Oklahoma storage hub are more depleted than they have been in the last three years, and prices of further dated oil contracts suggest they will stay lower for months, according to Reuters.

U.S. demand for crude among refiners making gasoline and diesel has surged as the economy has recovered from the worst of the pandemic. Demand across the globe means other countries have looked to the United States for crude barrels, also boosting draws out of Cushing, Reuters reported.

Cushing stockpiles have dropped to 31.2 million barrels, the lowest since October 2018, the Energy information Administration (EIA) said last week, or about half of where inventories were at this time a year ago.

Short-Term Outlook

At 14:30 GMT on Wednesday, the EIA will release its weekly inventories report. It is expected to show a build of 2 million barrels of crude oil.

Barring a bullish EIA report, we could see some profit-taking if the early weakness is any indication. However, looking beyond this week’s report, the outlook remains bullish for crude oil.

The next rally could be led by worries over storage levels at Cushing, combined with cold weather in Europe that could trigger another round of power switching. The narrow spread between WTI and Brent crude oil futures has put $90 WTI and $100 Brent on the radar.

At this point, it’ll take a surge in production by OPEC+ or a COVID resurgence to knock the bull market off course.