Oil Price Fundamental Daily Forecast – Traders Hoping EIA Data Triggers Turnaround, Fed Could Influence Prices

The direction of the market early in the session will likely be dictated by the U.S. Energy Information Administration report on crude oil inventories due to be released at 1330 GMT. It is expected to show a draw of 2.7 million barrels.
James Hyerczyk
Crude Oil
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Wednesday after a steep sell-off the previous session. The price action suggests position-squaring ahead of today’s U.S. Federal Reserve monetary policy decisions, which could have an impact on crude oil prices since they are likely to have an impact on the direction of the U.S. Dollar.

At 0928 GMT, February WTI crude oil is trading $46.76, up $0.17 or +0.32% and February Brent crude oil is at $56.56, up 0.30 or +0.53%.

Later today at 1530 GMT, traders will have the opportunity to react to the latest inventories data from the U.S. Energy Information Administration.

Crude oil prices plunged over 7 percent on Tuesday in reaction to renewed concerns over the global supply glut.

According to a report from the U.S. government earlier in the week, shale production is expected to climb to over 8 million barrels per day (bpd) for the first time by the end of December. Additionally, Russian oil output is so far this month at a record 11.42 million bpd, an industry source told Reuters.

Traders also expressed doubts that the OPEC-led plan to begin cutting production on January 1 by 1.2 million barrels per day would have an impact on supply.

American Petroleum Institute Report

The American Petroleum Institute (API) reported a crude oil inventory build of 3.45 million barrels for the week ending December 14. Analysts were looking for a draw of 2.475 million barrels.

Additionally, inventories in the Cushing, Oklahoma futures hub this week had climbed by 1.063 million barrels.

The API also reported a build in gasoline inventories as well for the week-ending December 14 in the amount of 1.76 million barrels. Analysts had forecast a build of 1.025 million barrels for the week. Distillate inventories fell this week by 3.442 million barrels, compared to an expected build of 391,000 barrels.

Forecast

The direction of the market early in the session will likely be dictated by the U.S. Energy Information Administration report on crude oil inventories due to be released at 1330 GMT. It is expected to show a draw of 2.7 million barrels.

Price should rise if the EIA report shows a bigger-than-expected draw. If the EIA reports a build like the API data then look for further weakness.

Late in the session, the Fed could have an impact on the price action. If the Fed comes across as dovish then this could weaken the dollar. A weaker dollar could drive up foreign demand for dollar-denominated crude oil. If the news fuels a rally in the stock market then this could also be supportive for prices.

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