Oil Price Fundamental Daily Forecast – Prices Weaken After API Reports Surprise Build, EIA on Tap

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Wednesday.

Yesterday, the markets nudged higher on concerns over escalating political turmoil in Venezuela. Concerns over tightening supply due to the expanded sanctions against Iran continued to remain an issue and traders still aren’t sure how much oil will be removed from the market, and whether Saudi Arabia will make up the difference. The OPEC-led production cuts continued to provide the most support. They have helped drive price higher by 40% since January 1.

Today, prices are being driven lower by concerns over increasing U.S. supply after the American Petroleum Institute (API) reported a surprise build in crude oil inventory.

At 07:16 GMT, June WTI crude oil futures are trading $63.16, down $0.76 or -1.19% and July Brent crude oil is at $71.37, down $0.69 or -0.96%.

API Reports Surprise Build

Late Tuesday, the API reported a surprise build in crude oil inventory of 6.81 million barrels for the week ending April 26. Traders were looking for a 2.093 million barrel build.

According to the API data, the net build is now 18.11 million barrels for the 18-week reporting period so far this year.

The API also reported a draw in gasoline inventories for the week-ending April 26 in the amount of 1.1 million barrels. Analysts were looking for a draw in gasoline inventories of 1.005 million barrels for the week. Distillates fell by 2.1 million barrels for the week.

Daily Forecast

Today’s U.S. Energy Information Administration (EIA) inventories report, due to be released at 14:30 GMT, should set the tone today. Traders are looking for a 1.3 million barrel build.

A larger than expected build should be bearish for prices. This could lead to a retest of last week’s lows. After a short-term reaction to the news, however, aggressive buyers could step in quickly since tightening supply is still the major issue.

Since there are still some who believe the markets are amply supplied, gains could also be limited. This suggests we could be looking at a rangebound trade over the near-term.