Oil Price Fundamental Daily Forecast – Market Remains Oversupplied

U.S. West Texas Intermediate and international-benchmark Brent crude oil are trading nearly flat on Wednesday after both markets posted steep declines the previous session. Excessive crude oil in the physical market continues to be the main driver of the selling pressure although worries over demand are beginning to be an issue.

At 0953 GMT, December WTI crude oil is trading $62.38, up $0.17 or +0.25% and January Brent crude oil is at $72.48, up $0.35 or +0.49%.

Supply Issues

Output from the world’s top-3 producers Russia, the United States and China is now at 33 million barrels per day for the first time. This is about a third of the almost 100 billion bpd of global consumption.

Iraq is targeting production capacity of 5 million bpd in 2019, up from 4.6 million bpd currently, Oil Minister Thamer Ghadhban said on Tuesday.

Venezuelan production was in a “free-fall” and could soon drop below 1 million bpd, the International Energy Agency’s Executive Director Fatih Birol warned on Tuesday. This is down from more than 2 million bpd it averaged last year.

In the U.S., the American Petroleum Institute (API) reported a crude oil inventory build of 7.83 million barrels for the week-ending November 2. The build was the fifth in as many weeks as reported by the API.

The API also reported a draw in gasoline inventories for the week-ending November 2 in the amount of 1.2 million barrels. Analysts had predicted a draw of 2.572 million barrels for the week. Distillate inventories were down this week by 3.64 million barrels, compared to a smaller expected draw of 2.775 million bpd.

Finally, according to Refinitiv Eikon data, Iranian crude exports have fallen to 1 million barrels per day (bpd) so far in November, down from almost 2 million bpd in October and around 3 million bpd in mid-2018.

Forecast

Although the markets are stabilizing early Wednesday, they remain under tremendous pressure ahead of today’s U.S. Energy Information Administration’s weekly inventories report, due at 1530 GMT. It is expected to show a 2.0 million barrel increase.

Due to the outcome of the election, demand could become an issue today especially if the U.S. Dollar weakens. This could help drive up foreign demand for dollar-denominated crude oil if the Greenback goes into a steep downtrend over the near-term.

To turn the markets higher over the longer-term, we’re going to have to see production cuts in the U.S., Saudi Arabia and Russia.