Oil Price Fundamental Daily Forecast – Strong Dollar Weighing on Prices Ahead of EIA Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower shortly before the release of the U.S. Energy Information Administration (EIA) weekly inventories report at 15:30 GMT.

Crude oil is being pressured by a sharp rise in the U.S. Dollar, which tends to dampen foreign demand for the dollar-denominated asset, and a plunge in demand for riskier assets. Stocks are down which is encouraging investors to cut positions in crude oil.

At 14:41 GMT, March WTI crude oil is at $52.37, down $0.24 or -0.46% and March Brent crude oil is at $55.68, down $0.23 or -0.41%.

Prices rose earlier in the session as industry data showed U.S. crude inventories fell unexpectedly. This news erased some of the persistent concerns about demand as coronavirus cases topped 100 million globally.

American Petroleum Institute Weekly Inventories Report

The API reported on Tuesday a draw in crude oil inventories of 5.272 million barrels for the week-ending January 22. Analysts had predicted a smaller draw of 430,000 barrels for the week.

The API reported a build in gasoline inventories of 3.058 million barrels for the week ending January 22 – compared to the previous week’s 1.129-million-barrel build. Analysts had expected a 1.764-million-barrel build for the week.

Distillate stocks saw an increase of 1.398 million barrels for the week, adding onto last week’s 816,000-barrel increase, while Cushing inventories fell by 3.475 million barrels.

OPEC+ Compliance

Despite the slight setback, oil prices continue to consolidate slightly below last year’s highs. The support is being provided by the voluntary Saudi Arabian production cuts, OPEC+ compliance of more than 85% of its monthly cuts in output and the large, steady demand from Asia, particularly China.

China COVID Outbreak Showing Signs of Containment

China, the second-largest oil consumer, has recently seen a coronavirus resurgence, but official Chinese data showed 75 new confirmed cases of COVID-19 on Wednesday, the lowest daily rise since January 11.

This news eased concern of a sharp drop in travel that threatened a new hit to demand over the Lunar New Year, when hundreds of millions typically make journeys.

Daily Forecast

Overshadowing today’s EIA report is the sharp rise in the U.S. Dollar, which is hurting demand and the steep drop in demand for risky assets.

Traders are looking for the EIA report to show a build in crude oil inventory of 1.6 million barrels.

Given the current weakness, a bigger than expected build is likely to trigger an even greater plunge in futures prices.

For a look at all of today’s economic events, check out our economic calendar.