Oil Price Fundamental Daily Forecast – Supported by Supply Disruption Fears Ahead of EIA Report.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Wednesday after posting an impressive rebound rally the previous session. The price action is being driven by supply concerns over an incident in the Middle East.
However, the inability to follow-through to the upside suggests traders are still worried about a global recession and COVID restrictions in China weighing on demand.
Prices were also underpinned by a report showing easing U.S. inflation and private industry data that showed a drop in U.S. crude stocks.
At 12:11 GMT, January WTI crude oil is trading $86.56, up $0.31 or +0.36% and January Brent crude oil is at $94.44, up $0.58 or +0.62%. On Tuesday, the United States Oil Fund ETF (USO) settled at $73.27, up $1.36 or +1.89%.
Oil Prices Rise after Incident Involving Vessel off Oman Coast
Crude oil prices jumped late Tuesday and early Wednesday on supply concerns over an incident involving a commercial vessel off the coast of Oman.
The Associated Press had reported that a Liberian-flagged oil tanker operated by the Singapore-based Eastern Pacific Shipping was struck in an exploding drone attack off the Gulf of Oman.
The United States Navy’s Fifth Fleet said it was aware of an incident on Wednesday in the Gulf of Oman involving a commercial vessel, Commander Timothy Hawkins told Reuters.
Oil prices were also supported on Tuesday after supply to parts of Europe via a section of the Druzhba pipeline was temporarily suspended, according to oil pipeline operators in Hungary and Slovakia.
Prices Supported by Large Draw in Crude Inventories
WTI crude oil prices were also being supported by a report from the American Petroleum Institute (API) late Tuesday that showed a large draw for crude oil of 5.835 million barrels. The move was enough to erase the previous week’s build.
The build in crude oil inventories was partially due to the Department of Energy’s release of 4.1 million barrels from the Strategic Petroleum Reserves in the week ending November 11, leaving the SPR with 392.1 million barrels.
The API also reported a build in gasoline inventories this week of 1.690 million barrels for the week ending November 11, compared to the previous week’s 2.553 million-barrel build.
Distillate stocks saw a build this week of 850,000 barrels, compared to last week’s 1.773-barrel decrease.
Traders are bracing for an upcoming battle between the bulls and the bears over tightening supply and lower demand.
The bulls are being supported by the OPEC+ output cuts and the upcoming EU embargo of Russian oil. The bears are monitoring the COVID restrictions in China and a forecast from OPEC cutting 2022 global oil demand growth for the fifth time since April.
The wildcards are the escalating war between Russia and Ukraine that could result in a pipeline disruption, and supply destruction worries after a drone attack on an oil tanker off the Gulf of Oman.
The lifting of COVID restrictions in China could also be a bullish catalyst.
Later today at 15:30 GMT, traders will get the chance to react to crude oil inventories data from the Energy Information Administration (EIA). It is expected to show a 2.0M drawdown. Although there could be a surprise following the drop in API inventories.