Oil Price Fundamental Daily Forecast – Quiet Trade as Investors Assess Omicron Risks Ahead of EIA Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading slightly higher on Wednesday after posting a strong rebound rally the previous session following a steep sell-off on Monday. The early volume is on the light side as traders prepare for the long Christmas holiday weekend.

At 12:12 GMT, March WTI crude oil futures are trading $71.02, up $0.20 or +0.28% and March Brent crude oil is at $74.02, up $0.06 or +0.08%. On Tuesday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $104.92, up $0.04 or +0.04%.

The early price action suggests traders are hoping the Omicron coronavirus variant would only have a limited economic fallout, however, health officials remain cautious. It also suggests that traders are sticking around for today’s U.S. government weekly inventories report after Tuesday’s industry report showed a friendlier-than-expected drawdown.

Tuesday Recap

Oil prices settled more than 3% higher on Tuesday, rebounding on renewed risk appetite the day after a sharp fall, but investors remained cautious as the Omicron coronavirus variant cut holiday travel plans, dimming the near-term fuel demand outlook.

Ahead of today’s trade, countries across Europe were considering new curbs on movement as the fast-moving Omicron variant swept the world days before Christmas, throwing travel plans into chaos and unnerving financial markets.

Crude oil traders don’t appear to be too rattled by the curbs and restrictions as they expect these measures to be temporary thanks to the rapid rollout of boosters in many countries.

OPEC+ Produces Below Target in November as Compliance Rises

There was some good news on Tuesday, OPEC+ compliance with oil production cuts rose to 117% in November from 116% a month earlier, two sources from the group told Reuters, indicating production levels remain well below agreed targets.

The International Energy Agency (IEA) said in its December oil market report that OPEC+ missed its production targets by 650,000 barrels per day (bpd) last month, compared with 730,000 bpd in October.

American Petroleum Institute Weekly Inventories Report

The API reported on Tuesday the inventory draw for crude oil the week-ending December 17 came in at 3.670 million barrels. Analyst expectations for the week were for a smaller draw of 2.633 million barrels.

The API also reported a build in gasoline inventories of 3.701 million barrels for the period after the previous week’s 426,000-barrel build.

Distillate stocks saw a decrease in inventory of 849,000 barrels for the week, after last week’s 1.016-million-barrel decrease.

Cushing saw a 1.272 million-barrel increase this week.

Daily Forecast

U.S. crude oil inventories were expected to have fallen for a fourth consecutive week, while distillate and gasoline stockpiles likely rose, a preliminary Reuters poll showed on Monday.

The U.S. Energy Information Administration (EIA) is expected to show a crude oil draw of 2.4 million barrels.