Oil Price Fundamental Daily Forecast – Supply/Demand Picture Rosy; Low Volume Biggest Concern for Traders

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are posting sideways-to-lower results on Thursday, while hovering around three-month highs as last week’s U.S. – China trade deal announcement continues to provide hope for strong global demand growth.

At the end of the year, the biggest concerns for traders are not the impact of the trade war on the global economy, Brexit or a U.S. recession, but rather the thin trading volume. Traders remarked that not even the new of President Trump’s impeachment by the U.S. House of Representatives rattled the oil markets.

At 10:15 GMT, February WTI crude oil is at $60.84, down $0.02 or -0.03% and February Brent crude oil is at $66.15, down $0.02 or – 0.02%.

U.S. Energy Information Administration Weekly Inventories Report

On Wednesday, the EIA reported that U.S. crude supplies fell by 1.1 million barrels for the week-ending December 13. Traders were looking for a decrease of 1.5 to 2.5 million barrels during the period.

The EIA data also showed supply increases of 2.5 million barrels for gasoline and 1.5 million barrels for distillates. Supply for gasoline was expected to climb 2.4 million barrels and distillate inventory was forecast to have risen by 600,000 barrels.

American Petroleum Institute Weekly Inventories Report

The API on Tuesday reported a surprise crude oil inventory build of 4.7 million barrels for the week-ending December 13. Analysts were looking for a 1.288-million-barrel draw.

After Tuesday’s reported inventory move, the net inventory moves so far this year stand at a build of 3.22 million barrels for the last 51 weeks, using API data, according to Oilprice.com.

The API also reported a huge build of 5.6 million barrels of gasoline for the week-ending December 13, compared to analyst estimates of a smaller build of 2.178-million barrels for the week.

Distillate inventories saw a large build of 3.7 million barrels for the week, while Cushing inventories fell by 300,000 barrels.

OPEC and Allies Agree to Deeper Production Cuts

Two weeks ago, OPEC and other non-OPEC producers such as Russia agreed to deepen production cuts by a further 500,000 barrels per day (bpd) from January 1 on top of previous reductions of 1.2 million barrels per day.

Upbeat Demand Growth Expectations

Given the trade agreement between the United States and China, traders have turned more optimistic over increased future demand. These expectations are helping to offset some of the bearishness from the API inventories data, while enhancing the value of the EIA data.

Daily Forecast

Speculative buyers have been driving prices higher for weeks on the hope of supply cuts and a trade deal. Low pre-holiday volume could cause these buyers to curtail their plans so don’t be surprised by profit-taking. Furthermore, some traders are questioning value, which may be another reason to lighten up on the long side and play for a break into a value area.