Oil Price Fundamental Daily Forecast – Tighter Global Inventories Underpinning Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Thursday, putting them in a position to challenge technical targets that could determine the next major move in the markets. There were no fundamental developments overnight, but buyers are still responding to yesterday’s bullish U.S. Energy Information Administration’s (EIA) inventories report.

At 08:03 GMT, May WTI crude oil is trading $58.92, up $0.33 or +0.58% and May Brent crude oil is at $68.02, up $0.47 or +0.46%.

The OPEC-led production cuts which began on January 1 and the U.S. sanctions against Iran and Venezuela have been carrying crude oil prices higher for months, but gains have been limited by concerns over rising U.S. inventories and production. However, these worries were lifted on Wednesday, at least temporarily, with the release of a bullish EIA inventories report.

Yesterday’s weekly EIA report for the week-ending March 8 showed U.S. commercial crude oil inventories fell as refineries hiked output.

Crude inventories dropped by 3.9 million barrels in the last week, to 449.07 million barrels, compared with analyst expectations for an increase of 2.7 million barrels. U.S. crude oil production also dipped, falling by 100,000 barrels per day (bpd) to 12 million bpd.

Additionally, in Venezuela, oil production and exports continued to be disrupted by a political and economic crisis that has caused massive blackouts and supply shortages. According to reports, two storage tanks exploded at a heavy-crude upgrading project in eastern Venezuela on Wednesday, according to an oil industry source and legislator.

Daily Forecast

With WTI and Brent crude oil hovering near their highs for the year, the upside momentum created by yesterday’s bullish EIA report is likely to continue. However, gains may be limited by concerns over weakening global demand.

Profit-taking could also bring a halt to the rally, but long investors are going to have to find a good reason to exit trades that have further upside potential. Tight global inventories from the OPEC-led production cuts and the situation in Venezuela are currently underpinning prices and since the catalysts driving these factors are not likely to change over the near-term, the markets are widely expected to be supported on price dips.

The key upside target for May WTI crude oil is $59.63 to $63.45. The primary upside target for May Brent crude oil is $67.74 to $71.69. We could see some selling on the first test of these zones.