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Oil Price Fundamental Daily Forecast – Pressured by OPEC, IEA Forecasts Calling for Global Supply Surplus

By:
James Hyerczyk
Published: Nov 17, 2021, 13:19 UTC

Traders are predicting that today’s U.S. EIA weekly inventories report will show a crude oil build of 1 million barrels.

WTI and Brent Crude Oil

In this article:

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Wednesday as traders await the release of the government’s weekly inventories report.

The catalysts behind today’s early session weakness are reports from the International Energy Agency (IEA) and OPEC warning of impending oversupply. Meanwhile, a steady climb in COVID-19 cases in Europe has traders talking about the possibility of demand destruction once again.

At 12:41 GMT, January WTI crude oil is trading $79.26, down $0.48 or -0.60% and January Brent crude oil is at $82.01, down $0.42 or -0.51%.

Perhaps helping to limit losses is a weekly report from the American Petroleum Institute (API) that showed a drop in U.S. gasoline stockpiles.

IEA Warns of Impending Oversupply

An oil market rally may ease off as prices that hit a three-year high last month help push up global supply, particularly in the United States, the International Energy Agency (IEA) said on Tuesday, Reuters reported.

“The world oil market remains tight by all measures, but a reprieve from the price rally could be on the horizon … due to rising oil supplies,” the Paris-based agency said in its monthly oil report.

“Current prices provide a strong incentive to boost (U.S.) activity even as operators stick to capital discipline pledges, it said.

OPEC Chief Urges Output Caution as Signs of Oil Surplus Grow

OPEC is seeing signs of an oil supply surplus building from next month so its members and allies will have to be “very, very cautious” when they review output policy at regular monthly meetings, the group’s secretary general said on Tuesday, Reuters reported.

“The surplus is already beginning in December,” OPEC Secretary General Mohammad Barkindo said on the sidelines of an energy conference, when asked if he was sure there would be an excess in oil supply next year.

“These are signals that we have to be very, very careful,” he told reporters.

American Petroleum Institute Weekly Inventories Report

The API reported a small inventory build in crude oil that was just enough to keep the market from panicking over dwindling inventories. This week, the API estimated the inventory build for crude oil to be 655,000 barrels. Analysts were looking for a build of 1.550-million barrels for the week.

The API also reported a draw in gasoline inventories of 2.792 million barrels for the week-ending November 12 – on top of the previous week’s 552,000-barrel draw. Distillate stocks saw an increase in inventories of 107,000 barrels for the week, on top of last week’s 573,000-barrel increase.

Daily Forecast

Traders are predicting that today’s U.S. Energy Information Administration (EIA) weekly inventories report will show a crude oil build of 1 million barrels.

Although OPEC sees a global supply surplus beginning in December, Reuters is reporting that the energy minister for OPEC’s United Arab Emirates indicated that OPEC+ would probably stay the course, and raise output by 400,000 barrels per day according to plan when it meets on December 2.

However, since the surplus is expected to last into the first quarter, OPEC+ may decide to curtail any future plans for an increase.

Furthermore, demand growth in 2022 is expected to slow and supply from U.S. shale companies is expected to rise.

Additionally, demand growth could slow even faster if there is another wave of COVID-19 cases.

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

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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