Oil Price Fundamental Daily Forecast – Sellers in Control after API Reports Bigger-than-Expected Build

U.S. West Texas Intermediate and international-benchmark Brent crude oil continued to weaken on Tuesday. Uncertainty over the direction of the U.S. Dollar ahead of President Trump’s State of the Union speech on Tuesday night and the release of the U.S. Federal Reserve’s monetary policy statement on Wednesday also encouraged investors to pare their long positions.

Fundamentally, the lack of hedge fund buying at current price levels suggests the market may be overbought. Furthermore, renewed concerns about increasing U.S. production in the wake of a jump in U.S. oil rigs last week also weighed on prices. Finally, long investors may be taking profits in anticipation of a drop in demand due to the start of seasonal maintenance.

March WTI crude oil futures settled at $64.50, down $1.06 or -1.62% and April Brent crude oil futures finished the session at $68.52, down $0.68 or -0.98%.

Forecast

Crude oil prices are down for a third session on Wednesday after data from the American Petroleum Institute showed U.S. crude stocks rose more than expected last week. General pressure on other commodities, stocks and bonds also contributed to the bearish tone.

At 0739 GMT, March WTI crude oil futures are trading $64.16, down $0.33 or -0.51% and April Brent crude oil futures are at $68.26, down $0.26 or -0.38%.

Brent futures turned the main trend to down on the daily chart, but there wasn’t much of a follow-through to the downside. If the selling persists through $67.79 then we could see an eventual test of $66.03.

WTI crude oil will change its trend to down on a move through $62.78. Its major downside target is $61.37.

Late Tuesday, the API reported a moderate build of 3.229 million barrels of U.S. crude oil inventories for the week-ending January 23. Analysts were looking for a small build of 126,000 barrels.

The API also reported another build in gasoline inventories. During the week-ending January 23, inventories rose 2.692 million barrels. Analysts had expected a smaller 1.809 million-barrel build.

Distillate inventories saw a large drawdown last week of 4.096 million barrels, compared with a forecast for a much smaller decline of 1.454 million barrels.

Later today at 1530 GMT, the U.S. Energy Information Administration is expected to report a build of about 100,000 million barrels. A bigger-than-expected draw will be bearish for crude oil.

The market is also expected to react to the Fed’s monetary policy statement. A hawkish Fed will boost the dollar and this could drive crude oil lower. A dovish Fed will lead to a weaker dollar and could underpin crude oil.