Oil Price Fundamental Daily Forecast – Prices Being Capped by Rising Global Supply ConcernsWTI prices are once again testing a retracement zone at $59.58 to $57.64. This zone has provided support for about three weeks.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Friday, pressured by a slight recovery in the U.S. Dollar. Crude oil is dollar-denominated so it tends to weaken because of lower foreign demand when the greenback rises. Traders are also expressing some concerns over rising global supplies and lower demand because of lingering COVID-related issues.
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Dollar Steadies after Week of Declines
The dollar is recovering slightly on Friday but was still heading for its softest week of the year after surprisingly weak U.S. jobs figures the previous day and ongoing loose Federal Reserve policy prompted investors to trim their bets. This may be helping to pressure crude oil today, but it didn’t help throughout the week as the greenback is on track for a nearly 1% weekly fall against a basket of major currencies.
IMF Sees Stronger Global Growth
It didn’t help much to rally the markets but it may be slowing down the selling pressure, but the International Monetary Fund said earlier in the week that unprecedented public spending to fight COVID-19 would push global growth to 6% this year, a rate not achieved since the 1970s. This should have underpinned prices because it provides a bullish narrative for fuel demand. Traders seemed to ignore the news because the next day, the new issue became higher supplies.
Energy Information Administration Weekly Inventories Report
The crude oil portion of the EIA report was friendly, but higher gasoline stocks capped any potential gains.
U.S. crude oil stockpiles fell more than expected last week, while gasoline inventories jumped sharply as refining rates rose to the highest in over a year, the Energy Information Administration said on Wednesday.
Crude inventories fell by 3.5 million barrels in the week to April 2 to 501.8 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.4 million-barrel drop. Stocks in the Midwest fell to their lowest since March 2020.
U.S. gasoline stocks rose by 4 million barrels in the week to 230.5 million barrels, compared with forecasts for a 221,000-barrel drop. With summer driving season approaching, the expectation is that gasoline inventories will soon start to recede, but that hasn’t happened yet.
Distillate stockpiles, which include diesel and heating oil, rose by 1.5 million barrels to 144.1 million barrels, versus expectations for a 486,000-barrel rise.
Refinery crude runs rose by 103,000 barrels per day and utilization rates edged up 0.1 percentage point, and are now running at 84% of capacity, their highest since March 2020. Additionally, Net U.S. crude imports fell last week by 141,000 bpd, while crude production fell 200,000 bpd to 10.9 million bpd.
Rising Global Supplies Becoming a Concern
While crude stocks in the United States fell more than forecast by analysts, gasoline inventories jumped sharply, also against expectations, the Department of Energy said on Wednesday.
At the same time, supply is rising across the world with Russian output increasing from average March levels in the first few days of April, traders said. Additionally, Iran may see some sanctions lifted, which would add to global supplies, with the U.S. and other powers holding talks on reviving a nuclear deal that almost stopped Iranian oil from coming to market.
WTI prices are once again testing a retracement zone at $59.58 to $57.64. This zone has provided support for about three weeks. Needless to say, trader reaction to this zone will set the near-term tone.
A rally over $59.58 will indicate the return of buyers, but gains are likely to be limited by $62.52 – $63.76.
A trade through $57.06 will send a bearish signal. It’s a potential trigger point for an acceleration to the downside with $51.37 the next major target.