Oil Price Fundamental Daily Forecast – Oversupply Fears Fanned by Bearish API Report; EIA on Tap

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are under pressure Wednesday as sellers returned after yesterday’s one-day reprieve. The markets gave up yesterday’s gains early in the session as a surge in U.S. crude stocks and rising coronavirus infections in the United States and Europe fanned fears of a supply glut and weaker fuel demand.

At 09:49 GMT, December WTI crude oil is trading $38.00, down $1.57 or -3.97% and December Brent crude oil is at $39.90, down $1.30 or -3.16%.

American Petroleum Institute Weekly Inventories Report

The API reported on Tuesday a bigger build than expected in crude oil inventories of 4.577 million barrels for the week-ending October 23. Analysts had predicted a much smaller inventory build of 1.11 million barrels.

The API also reported a surprise build in gasoline inventories of 2.252-million barrels of gasoline for the week-ending October 23 – compared to the previous week’s 1.622-million barrel draw. Analysts had estimated a 2.0-million-barrel draw for the week.

Distillate inventories were down by 5.333 million barrels for the week, compared to last week’s 5.983-million-barrel draw, while Cushing inventories rose by 136,000 barrels.

Oil production in the United States slid significantly last week, increasing the gap between this week and the all-time high this year to 3.2 million barrels per day. U.S. oil production currently sits at 9.9 million bpd, according to the Energy Information Administration (EIA).

Daily Forecast

WTI and Brent crude oil prices finished higher on Tuesday despite the expected drop in demand because of a number of factors. Bearish factors this week include a ramp-up of oil production in OPEC producer Libya and a surge in COVID-19 cases in the United States, Europe and Russia.

Another hurricane in the Gulf of Mexico helped produce a rise in prices yesterday, but the reaction appeared to be muted as forecasts began to show the storm would miss major production facilities.

“A resurgence in COVID-19 cases in Europe and North America has stopped the recovery in demand in its tracks,” ANZ Research said in a note.

“If market conditions worsen, (OPEC+) will have no choice but to delay the increase of quotas by a month or two at its meeting on December 1,” ANZ said.

Russian President Vladimir Putin indicated last week he may agree to extend OPEC+ oil production reductions.

It appears that prices are likely to continue to retreat until OPEC+ decides it can’t take the pain. I don’t think anyone can control the demand recovery at this time, but production can be controlled and that may be enough to provide short-term support.

Today’s Energy Information Administration (EIA) weekly inventories report is expected to show a 1.5 million barrel build in crude. However, its the gasoline and distillate numbers that are likely to draw the most attention from traders.

For a look at all of today’s economic events, check out our economic calendar.