Oil Price Fundamental Daily Forecast – Middle East Tensions Offset Reported API Inventories Build

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures remained at elevated levels on Wednesday amid growing tensions surrounding possible air strikes on Syria. This news offset a reported build in crude oil inventory by the American Petroleum Institute.

At 0700 GMT, June WTI crude oil is trading $65.31, down $0.13 or -0.20%. June Brent crude oil is at $70.83, down $0.21 or -0.30%.

Prices rose on Tuesday, supported by easing concerns over a prolonged trade war between the United States and China after China’s President Xi Jinping on Tuesday gave an upbeat speech that eased the jitters of risk investors.

Forecast

Crude oil is likely to remain news driven today based on the early trade. This sets up the possibility of a two-sided trade.

Traditional fundamental analysis suggests a bearish tone. According to a report from the American Petroleum Institute on Tuesday, U.S. crude inventories rose by 1.8 million barrels in the week to April 6 to 429.1 million. This compared with analysts’ expectations for a decrease of 189,000 barrels.

The API also reported a build in gasoline stocks for the week-ending April 6 of 2.005 million in gasoline stockpiles, bigger than the 1.425-million-barrel draw that analysts had expected.

Distillate inventories saw a draw this week of 3.849 million barrels. Analysts had forecast a small decline of 29,000 barrels.

Inventories at the Cushing, Oklahoma, site increased by 1.452 million barrels this week, on top of last week’s large build.

Additionally, the U.S. Energy Information Administration (EIA) said on Tuesday that it expects domestic crude oil production in 2019 to rise by more than previously expected, driven largely by growing U.S. shale output.

In its monthly short-term energy outlook, the EIA forecast that U.S. crude output will rise by 750,000 barrels per day to 11.44 million bpd next year. Last month, it expected a 570,000 bpd year-over-year increase to 11.27 million bpd.

Helping to offset the negative inventories news is a report which warned of an escalation of Middle East tensions after Europe’s air traffic control agency warned of possible air strikes on Syria in the next 72 hours.

At 1430 GMT, the EIA will release its weekly inventories data. It is expected to show a 600,000 decline in U.S. stockpiles. If the report comes out as expected or better, then coupled with the tensions in the Middle East, prices should rise. An unexpected build will be bearish for prices but they may not fall unless tensions ease over the Syrian airstrikes.