Oil Price Fundamental Daily Forecast – Likely Rangebound Until Nov. 30 OPEC Meeting

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures closed lower on Wednesday after government data showed an unexpected rise in crude and gasoline stockpiles. However, an increase in refining runs and a drawdown in distillates helped limit losses.

January WTI crude oil futures settled at $55.52, down $0.37 or -0.66% and February Brent crude oil closed at $61.76, down $0.30 or -0.48%.

According to the U.S. Energy Information Administration, crude oil inventory rose 1.9 million barrels the week-ending November 10. Traders were looking for a draw of 2.1 million barrels. The number was still lower than the 6.5 million-barrel rise reported by the American Petroleum Institute.

Gasoline stocks rose 894,000 barrels, compared with forecasts for a 919,000-barrel drop. Distillate stocks fell 799,000 barrels, versus expectations for a 1.3 million-barrel drop.

Forecast

The EIA data was bearish but the selling pressure was muted because investors had already priced in a bearish number the session before based on the API data.

The bias seems to be to the downside at this time. Firstly, there is confusion over demand. Earlier in the week, OPEC reported that it sees demand increasing in 2018. However, this report was offset by a report from the International Energy Agency (IEA) which cut is oil demand growth forecast by 100,000 barrels per day (bpd) for both 2017 and 2018.

Secondly, U.S. production is expected to rise. Furthermore, the IEA said non-OPEC production would rise 1.4 million bpd in 2018, undermining efforts by OPEC and other producers to limit global crude supplies and support prices.

At this time, it’s too early to call a top but we do believe that there are buyers trapped near the recent WTI top at $58.14. Sellers may continue to press this market, hoping to wash out these weak buyers. This could drive the market into its primary downside target at $54.62 to $53.78. Since the main trend is up, buyers are likely to come in on a test of this area.

The WTI and Brent futures markets are likely to remain rangebound until OPEC and the other major producers decide on November 30 whether to end the program designed to cut output or extend it beyond the March 30 deadline.