Oil Price Fundamental Daily Forecast – Surprise API Crude Inventory Build Caps Rally

U.S. West Texas intermediate and international-benchmark Brent crude oil futures are inching lower on Thursday after a private industry report showed an unexpected rise in crude oil inventories late Wednesday. The news may have rattled some of the weaker longs ahead of Friday’s official Energy Information Administration (EIA) inventory data due on Friday.

Despite the slight setback, the market remains supported by expectations of massive COVID-19 relief spending under U.S. President Joe Biden, OPEC+’s output cuts and the voluntary reduction of production by Saudi Arabia in February and March.

At 13:33 GMT, March WTI crude oil is trading $53.13, down $0.18 or -0.34% and March Brent crude oil is at $55.94, down $0.14 or -0.25%.

Worries Over Rising Coronavirus Cases

Rising COVID-19 cases in China, the world’s largest crude oil importer, could also be capping gains.

Beijing plans to impose strict COVID testing requirements during the Lunar New Year holiday season, when tens of millions of people are expected to travel, as it battles the worst wave of new infections since March 2020.

New Moves by Biden Administration to Watch

New U.S. President Joe Biden’s administration has committed to curb carbon emissions and among his first actions as president, Biden announced America’s return to the Paris climate accord and revoked a permit for the Keystone XL oil pipeline project from Canada.

The administration is also committed to ending new oil and gas leasing on federal lands.

The administration will also seek to lengthen and strengthen the nuclear constraints on Iran through diplomacy and will be raising the issue in early talks with foreign counterparts and allies, according to the White House.

American Petroleum Institute Weekly Inventories Report

The API reported late Tuesday a build in crude oil inventories of 2.562 million barrels for the week-ending January 15. Analysts had predicted an inventory draw of 1.167 million barrels for the week.

The API also reported a build in gasoline inventories of 1.129 million barrels for the week ending January 15, compared to the previous week’s 1.876-million-barrel build. Analysts had expected a 2.771-million-barrel build for the week.

Distillates saw an increase of 816,000 barrels for the week, adding onto last week’s 4.433-million-barrel increase, while Cushing inventories saw the only decrease this week, falling by 4.285 million barrels.

Daily Forecast

The bullish fundamentals are getting clouded by several negative developments including China’s sequestering of millions of residents, the IEA’s grim demand outlook and the slow rollout of the coronavirus vaccines. Some may argue that rising U.S. rig counts could also lead to increased supply.

The reality of it all is that this rally is probably being driven by speculators and big money hedge funds and, of course, OPEC’s willingness to keep production artificially low. At this time, it’s hard to determine where the demand will come from.

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