Oil Price Fundamental Daily Forecast – Testing Key Support Zone While Being Pressured by Supply Concerns
U.S. West Texas Intermediate and international-benchmark crude oil are trading slightly lower on Thursday as worries about both supply and demand weigh on sentiment. The markets are also testing a key support area that could determine whether prices resume their rally or accelerate to the downside.
Oil prices are also being pressured on Thursday after yesterday’s government report showed a big increase in U.S. gasoline stocks, causing concerns about demand for crude weakening in the world’s biggest consumer of the resource at a time when supplies around the world are rising.
While crude stocks in the United States fell more than forecast by analysts, gasoline inventories jumped sharply, also against expectations, the Department of Energy said on Wednesday.
At the same time, supply is rising across the world with Russian output increasing from average March levels in the first few days of April, traders said. Additionally, Iran may see some sanctions lifted, which would add to global supplies, with the U.S. and other powers holding talks on reviving a nuclear deal that almost stopped Iranian oil from coming to market.
Energy Information Administration Weekly Inventories Report
U.S. crude oil stockpiles fell more than expected last week, while gasoline inventories jumped sharply as refining rates rose to the highest in over a year, the Energy Information Administration said on Wednesday.
Crude inventories fell by 3.5 million barrels in the week to April 2 to 501.8 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.4 million-barrel drop. Stocks in the Midwest fell to their lowest since March 2020.
U.S. gasoline stocks rose by 4 million barrels in the week to 230.5 million barrels, compared with forecasts for a 221,000-barrel drop. With summer driving season approaching, the expectation is that gasoline inventories will soon start to recede, but that hasn’t happened yet.
Distillate stockpiles, which include diesel and heating oil, rose by 1.5 million barrels to 144.1 million barrels, versus expectations for a 486,000-barrel rise.
Refinery crude runs rose by 103,000 barrels per day and utilization rates edged up 0.1 percentage point, and are now running at 84% of capacity, their highest since March 2020. Additionally, Net U.S. crude imports fell last week by 141,000 bpd, while crude production fell 200,000 bpd to 10.9 million bpd.
Bullish traders continue to find value inside a key retracement zone at $59.58 to $57.64. This area has been providing support for almost three weeks. Buyers may be trying to build a support a base in this area, but it’s going to be hard to mount a meaningful rally as long as OPEC and its allies are planning to raise output, Iran may be preparing to bring more supply to the market and gasoline supply could remain at elevated levels until the summer driving season begins.
The daily chart indicates there is plenty of room to the downside if $57.64 fails as support.
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