Oil Price Fundamental Daily Forecast – Prices Stabilize Ahead of Opening After Brent Plunges to 1999 Low

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading flat on Wednesday shortly before the regular session opening. The U.S. market is holding inside the previous session’s range, but Brent took out yesterday’s low before erasing that loss. The earlier move took the futures contract to $16 a barrel, its lowest level since 1999.

At 11:02 GMT, June WTI crude oil futures are trading $11.69, up $0.12 or +1.04% and June Brent crude oil is at $19.47, up $0.14 or +0.72%. Earlier in the session, the market hit a low of $16.00.

No Change in the Bearish Narrative

The story remains the same on Wednesday. Excess supply caused by the economic fallout from the pandemic continues to hammer demand for fuels.

Earlier in the week, the front-month U.S. futures contract fell into negative territory for the first time in history and set a record for the number of contracts traded on Tuesday. The surge in volume and volatility prompted the CME Group, the world’s biggest commodities exchange, to raise margins on crude oil futures.

Crude oil prices have plummeted by close to 80% this year as the pandemic has spread across the world and every sector of the economy, killing nearly 180,000 people, routing financial markets and leading to potentially the worst economic meltdown since the depression of the 1930s.

The viral outbreak has caused fuel demand to drop by roughly 30% worldwide and energy companies in the United States, the world’s biggest producer, are scrambling to find storage for excess oil.

“This is a direct result of excessive investment coinciding with a sudden demand shock in a landlocked area with limited storage and transportation,” Goldman Sachs said in a report.

American Petroleum Institute Weekly Storage Report

The API reported late Tuesday another tremendous crude oil inventory build of 13.226 million barrels for the week-ending April 17 as the demand destruction caused by the coronavirus lockdown dragged on. Despite the relatively large build, it actually fell short of the 15.15 million barrel estimate.

The API also reported a build of 3.435 million barrels of gasoline for the week-ending April 17. Traders were looking for a 3.578 million barrel build for the week.

Distillate inventories were up by 7.639 million barrels for the week, compared to last week’s 5.640 barrel build, while Cushing inventories saw a large gain of 4.913 million barrels.

Daily Forecast

The fundamentals are bearish. Nothing changed overnight. All traders can hope for is some stability ahead of the May 1 OPEC production cuts. However, there is no guarantee that this news will put in a bottom since the cuts aren’t likely to trickle through the global economy for several weeks.

At 14:30 GMT, the U.S. Energy Information Administration (EIA) weekly storage report is expected to show a 14.7 million barrel build.