Oil Price Fundamental Daily Forecast – Surprise API Draw Providing Early Support, EIA Report Next

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher early Wednesday, but inside yesterday’s range, suggesting investor indecision and impending volatility.

Prices continue to be supported by the on-going supply cuts from OPEC and its allies as well as the U.S. sanctions against Iran and Venezuela. The markets are being further supported by a surprise draw in crude inventories according to the American Petroleum Institute (API). However, gains are being limited by concerns over rising U.S. production, which investors will learn more about in today’s U.S. Energy Information Administration (EIA) inventories report.

This week’s focus continues to be on the supply side of the equation, however, slowing global economic conditions continue to shine a spotlight on demand. On Thursday, these issues could be raised again when China releases its report on Industrial Production.

At 07:03 GMT, May WTI crude oil is trading $57.54, up $0.34 or +0.59%. May Brent crude oil is at $66.94, up $0.27 or +0.40%.

OPEC and Venezuela Holding Up Prices

While the OPEC-led production cuts continue to do their job by trimming the excess global supply and stabilizing prices, the markets are getting an extra boost from the news of the worst blackout on record in Venezuela. According to reports, most of the South American country has been without power for six days, leaving hospitals struggling to keep equipment running, food rotting in the tropical heat and exports from the country’s main oil terminal stranded.

Barclay’s bank is saying, “Failures in the electrical system… (are) likely to accelerate the loss of 700,000 barrels per day” in oil supply.

API Reports Surprise Draw

Late Tuesday, the API reported a surprise draw in crude oil inventories of 2.6 million barrels for the week-ending March 8. This was significantly different from analysts’ predictions of a 2.655 million barrel build.

The API also reported a huge draw in gasoline inventories of 5.8 million barrels for the week-ending March 8. This was greater than the forecast of a draw of 2.532 million barrels for the week. Distillate inventories also increased by 195,000 barrels, compared to an expected draw of 1.858 million barrels for the week.

Daily Forecast

Crude oil prices are likely to be supported early Wednesday by the surprise API drawdown as investors await the release of the weekly U.S. Energy Information Administration report at 14:30 GMT. Traders are looking for a 2.7 million barrel build, but expectations could change to reflect the API data as we approach the regular session opening and report time.

If there is topping action, it could be related to downside risks from economic growth concerns and strong oil supply growth from the United States. However, these are only likely to offset the OPEC-led supply cuts and the effect of U.S. sanctions against Iran and Venezuela. This likely means the markets are at or near a balance point, which could lead to a rangebound trade.