Oil Price Fundamental Daily Forecast – Gains May Be Limited by Concerns Over Surging U.S. Production

U.S. West Texas Intermediate and international-benchmark Brent crude oil finish lower on Thursday, led by several factors including signs of an inventory build at the U.S. futures delivery hub in Cushing, Oklahoma, surging U.S. crude production and investor concerns about a potential trade war.

April WTI crude oil settled at $60.12 or $1.03 or -1.68% and May Brent crude oil finished at $63.61, down $0.73 or -1.13%.

On Wednesday, the U.S. Energy Information Administration (EIA) reported that U.S. crude inventories rose by 2.4 million barrels during the week-ending March 2, compared with analysts’ expectations for an increase of 2.7 million barrels.

The EIA also said weekly U.S. crude production hit a record high per day last week of almost 10.4 million barrels.

On Tuesday, the EIA said it expects U.S. crude output in the fourth quarter of 2018 to reach an average of 11.17 million bpd, up from the previous forecast a month ago of 11.04 million bpd.

Also pressuring prices was data from market intelligence from Genscape that showed inventories at the Cushing, Oklahoma storage hub rose by more than 290,000 barrels in the week to March 6, traders who saw the data said.

Stockpiles in Cushing have more than halved since November and this increase, if confirmed by official data, would be the first build in 12 weeks.

Forecast

Geopolitics are at the forefront early Friday, helping to underpin crude oil prices. Futures are being supported by the news that North Korean leader Kim Jong Un will meet with U.S. President Donald Trump.

At 0817 GMT, April WTI crude oil is trading $60.31, up $0.20 or +0.33% and May Brent crude oil is at $63.88, up $0.27 or +0.42%.

According to South Korea’s national security chief, Trump and Kim will likely meet by May and Kim has pledged to refrain from further nuclear or missile tests. The White House said Trump would accept the invitation at a place and time to be determined.

The news about the meeting between Trump and Kim could support prices today if it drives up demand for higher risk assets. However, gains could be limited by worries over soaring output from the United States, which has risen by 23 percent since mid-2016, to 10.37 million barrels per day (bpd).