Oil Price Fundamental Daily Forecast – Markets Underpinned by Big API Drawdown

U.S. West Texas Intermediate and international-benchmark Brent crude oil finished slightly lower after a mixed trading session on Tuesday. Traders reacted to expectations of high U.S. production and exports offset concerns that fighting between Iraqi and Kurdish forces could threaten the country’s crude output.

December West Texas Intermediate crude oil settled at $52.11, down $0.03 or -0.06% and January Brent crude oil finished the session at $57.54, down $0.02 or -0.03%.

Traders are watching rising oil production in the United States and persistently high exports tied to the widening spread between Brent and WTI crude oil. These factors are likely to continue to limit gains in oil prices.

On the bullish side, prices are being bolstered by the situation in Iraq and the tension between the United States and Iran, which is increasing the global risk premium for oil.

Forecast

Based on the early trade on Wednesday, crude oil prices could extend this week’s gains due to concerns that tensions in the Middle East could disrupt supplies and a fall in U.S. crude inventories.

According to the American Petroleum Institute (API), U.S. crude inventories fell by 7.1 million barrels in the week to October 13 to 461.4 million barrels. Analysts were looking for a drawdown of 3.9 million barrels.

Additionally, gasoline inventories, according to the API, saw a surprise build of 1.941 million barrels for the week-ending October 13, against an expected draw of 340,000 barrels.

The crude oil draw should be enough underpin prices, but the gasoline number may limit gains. The wildcard on Wednesday will be the escalating tensions between Iraq and the Kurds. At risk is the 500,000 barrel-per-day Kirkuk oil field cluster.

Wednesday’s U.S. Energy Information Administration inventories report is expected to show a draw of 4.7 million barrels.

Trader reaction to the recent top in January Brent crude oil at $58.35 will set the tone today. Taking out this level could trigger a surge into the psychological $60.00 level. The key level to watch for WTI crude is $53.11.