Oil Price Fundamental Daily Forecast – Trump Speech, EIA Inventories Data to Set Tone

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading only slightly better shortly before the regular session opening on Wednesday after spiking to a multi-month high earlier in the session.

Prices rose sharply earlier in the session after Iran launched a rocket attack on American forces in Iraq. The escalation of the tensions between the United States and Iran sparked fears of a widening conflict in the Middle East, with energy market professionals increasingly concerned the fallout could soon disrupt regional crude supplies.

At 11:23 GMT, February WTI crude oil is trading $62.95, up $0.25 or +0.41%. This is down from an intraday high of $65.65. March Brent crude oil is at $68.83, up $0.56 or +0.82%. Earlier in the session, it reached a high of $71.99.

The buying stopped after a pair of tweets from Iran and the United States.

Iranian Foreign Minister Mohamad Javad Zarif said via Twitter that “we do not seek escalation or war, but will defend ourselves against any aggression.”

U.S. President Donald Trump tweeted, “All is well!” He also added that an assessment of casualties was taking place.

American Petroleum Weekly Inventories Report

Late Tuesday, the API reported a large crude oil inventory draw of 5.95 million barrels for the week-ending January 3, compared to analyst expectations of a smaller 4.10 million-barrel draw in inventory.

The API also reported a huge build of 6.70 million barrels of gasoline for the week-ending January 3, threatening to erase any price gains in crude oil due to the larger than expected draw. Traders were looking for gasoline inventories to increase by 2.654-million barrels for the week.

Distillate inventories saw a build of 6.40 million barrels for the week, while Cushing inventories fell by 1.0 million barrels.

Daily Forecast

Traders should continue to expect heightened volatility in either direction. Traders are hoping President Trump provides more clarity when he addresses the nation at about 14:00 GMT on Wednesday. This speech could set the tone in the crude oil market for the rest of the session.

CNBC writes that “The reassuring tone of Trump’s tweet marked an unexpected shift away from the harsh rhetoric the president has used in recent days to characterize tensions with Iran, which escalated following a U.S. strike that killed Iranian General Qasem Soleimani. Given this assessment, oil traders have to be prepared for a two-sided response by market participants.

At 15:30 GMT, traders will get the opportunity to respond to the latest inventory data from the U.S. Energy Information Administration (EIA). It is forecast to report a 3.4 million barrel draw down. Prices could firm if the draw is larger-than-estimated.

Recently, the EIA said U.S. crude oil production for the week ending December 27 stayed at 12.9 million barrels per day for the second week in a row – a high for U.S. oil producers on the last week of the year and a 1.2 million bpd increase from the start of 2019.