Oil Price Fundamental Daily Forecast – Prices Sink on Demand Woes; EIA Report on TapThe American Petroleum Institute (API) estimated on Tuesday a surprise crude oil inventory draw. However, the news wasn’t strong enough to derail the bearish tone in the market.
U.S. West Texas Intermediate and international-benchmark Brent crude oil slid to four year lows early Wednesday, shattered by fears for fuel demand and the global economy amid travel and social lockdowns triggered by the coronavirus epidemic in a number of countries around the world.
Prices are falling despite efforts to support economies, with the wealthiest nations prepared to let loose trillions of dollars of spending to lessen the fallout from the coronavirus outbreak, as well as imposing social restrictions not seen since World War II.
In other news, the American Petroleum Institute (API) estimated on Tuesday a surprise crude oil inventory draw. However, the news wasn’t strong enough to derail the bearish tone in the market.
Plunge in Oil Prices Could Cost Energy Industry Thousands of Jobs
Historically, big declines in the price of oil tend to have a mixed impact on Americans. Quick sell-offs have been met by equally quick rebounds, keeping the impact of lower prices to a minimum, but more sustained swoons can have real economic consequences.
On the upside, a fall in oil prices usually leads to cheaper gasoline at the pump and offers the vast majority of U.S. consumers the freedom to spend their cash elsewhere. But a reduction in income for the fraction of U.S. workers who make their living in or supporting big energy can have more serious ramifications for the states that host oil and gas production. Those typically include Texas, North Dakota, Alaska, California and New Mexico, which together account for about 67% of U.S. crude oil production.
Industrywide layoffs may come later and occur more gradually as companies wait to see how long oil remains at the new lows or if Russia comes back to the negotiating table.
American Petroleum Institute Weekly Inventories Report
The API estimated on Tuesday a surprise crude oil inventory draw of 421,000 barrels for the week-ending March 13. Traders were looking for a build of 3.5 million barrels.
The API also reported a large draw of 7.834 million barrels of gasoline for the week-ending March 13, after last week’s 3.09-million barrel draw. This week’s draw compares to analyst expectations for a 3.0-million-barrel draw for the week.
Distillate inventories were also down, by 3.625 million barrels for the week, compared to last week’s 4.679-million draw, while Cushing inventories rose by 66,000 barrels.
At 14:30 GMT on Wednesday, the U.S. Energy Information Administration (EIA) will release its weekly inventories report. It is expected to show a crude oil build of 3.5-million-barrels.