Oil Price Fundamental Daily Forecast- Rising U.S. Exports Raises Concerns Over Global Supply Glut

U.S. West Texas Intermediate and international-benchmark Brent crude oil closed lower on Wednesday after a surprising jump in U.S. crude exports to a record 2 million barrels per day. This news raised concerns over the global supply glut.

November WTI crude oil futures settled at $49.98, down $0.44 or -0.87% and December Brent crude oil closed at $55.80, down $0.20 or -0.36%.

According to the U.S. Energy Information Administration, U.S. crude stockpiles fell sharply the week-ending September 29, but crude exports rose to 1.98 million barrels per day.

The EIA said U.S. crude inventories fell 6 million barrels, a much bigger draw than the decrease of 756,000 barrels analysts had expected.

Gasoline stocks rose 1.6 million barrels, compared with analyst expectations for a 1.1 million-barrel gain.

Distillate stockpiles, which include diesel and heating oil, fell 2.6 million barrels, versus expectations for a 1.8 million-drop, the EIA data showed.

In other news, OPEC Secretary-General Mohammed Barkindo said he was confident his organization could restore sustainable stability to markets. Russian President Vladimir Putin said he did not exclude an extension of output cuts until the end of 2018.

 Forecast

WTI and Brent crude oil are trading lower early Thursday as investors continue to digest the EIA report. I think that the export number through traders for a loop because this is a component of the weekly report that they don’t normally focus on. Based on the API report late Tuesday, I was focusing on the gasoline number.

Although the export number points to growing demand and the rising profile of the United States as a major supplier of crude and products around the world, if it continues, the global supply glut will grow and this is a concern for OPEC.

The wide price premium of Brent over WTI crude has boosted appetite for U.S. oil globally. This premium is going to have to come down or U.S. exports will continue to rise. In order to satisfy world demand for U.S. crude, U.S. production will increase. This will put pressure on prices.

If crude prices remain high enough to encourage increased U.S. shale production then prices are going to have to fall to curtail this activity.