Oil Price Fundamental Daily Forecast – Surprise EIA Build Could Pressure Prices Along with Demand ConcernsGovernment data is showing that hedge funds and other money managers have increased bets that demand for oil will be sustained. However, the markets may not go anywhere over the near-term until a deal is reached on U.S.-China trade talks. We could start to see some movement in that area when trade talks resume on Thursday.
U.S. West Texas Intermediate and international benchmark Brent crude oil futures are trading mixed on Wednesday. The price action is also indicating a slight divergence between WTI and Brent crude oil with the U.S. market showing more strength this week. Both markets are still having trouble overcoming major long-term resistance areas.
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With technical resistance clearly defined overhead, the price action this week suggests the markets have reached a balance point with traders waiting for the next event to trigger the next major move. WTI is facing a wall of resistance at $59.63 to $60.39 and Brent’s resistance zone at $67.90 to $68.45.
Continuing to provide the best support and generate the most optimism for higher prices is the OPEC-led production cuts. Additional support is being fueled by the U.S. sanctions against Iran and Venezuela. On Tuesday, prices spiked higher as Venezuela’s main oil export port of Jose and its four crude upgraders were unable to resume operations following a massive power blackout on Monday, the second in a month. The news had a greater impact on WTI prices than Brent.
American Petroleum Institute Weekly Inventories Report
Late Tuesday, the American Petroleum Institute (API) reported a 1.9 million barrel build during the week-ending March 22. Traders were looking for a draw of 1.2 million barrels. The API also reportedly showed stockpile declines of 3.5 million barrels for gasoline and 4.3 million barrels for distillates. Traders were looking for inventory declines of 3.6 million barrels for gasoline and 800,000 barrels for distillates.
Wednesday’s weakness suggests growing fears over the impact of a global economic slowdown on demand. Recent manufacturing data from Asia, Europe and the United States pointed towards developing weakness.
Government data is showing that hedge funds and other money managers have increased bets that demand for oil will be sustained. However, the markets may not go anywhere over the near-term until a deal is reached on U.S.-China trade talks. We could start to see some movement in that area when trade talks resume on Thursday.
Today’s U.S. Energy Information Administration’s weekly inventories report, due out at 14:30 GMT, is expected to show a 1.1 million barrel draw down for the week-ending March 22. Given the surprise in the API report, traders should be prepared for a possible build. If this occurs then we should see further weakness later today.