Oil Price Fundamental Daily Forecast – Uncertainties Being to Exert Downside Pressure

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are under pressure early Thursday due to concerns over rising U.S. production and a cooling Chinese economy. The selling started on Wednesday after the U.S. government reported another weekly increase in output. Continuing to underpin prices are the OPEC-led support cuts, which began on January 1.

At 0910 GMT, March WTI crude oil is trading $52.30, down $0.30 or -0.56%. March Brent crude oil is at $61.05, down $0.27 or -0.44%.

Oil prices moved higher on Wednesday, bolstered by strength in U.S. equity markets and the supply cut agreement by OPEC and its allies, but gains were capped by new data showing growing U.S. refined product inventories and record crude production.

OPEC and major non-OPEC producer Russia agreed in December to cut combined oil output by 1.2 million barrels per day from January. Russia’s deputy energy minister said the country will reach its oil output target reduction in April.

Despite these supply cuts, the major concern remains rising U.S. production.

U.S. Energy Information Administration Weekly Inventories Report

On Wednesday, the EIA said crude production rose the week-ending January 11 to a record 11.9 million barrels per day, as crude exports jumped close to record highs near 3 million bpd.

U.S. fuel stockpiles also rose more than forecast and were up for the fourth straight week, EIA data showed.

The EIA also said gasoline stockpiles rose 7.5 million barrels, well-above analysts’ expectations for a 2.8 million-barrel gain. At 255.6 million barrels, gasoline stocks were at the highest weekly level since February of 2017.

Distillate stockpiles increased 3 million barrels, versus expectations for 1.6 million-barrel rise, the data showed.

Crude inventories fell 2.7 million barrels, more than double forecasts.

Forecast

The crude oil market appears to be consolidating with the OPEC-led cuts providing support and rising U.S. production and the slowing global economy putting a lid on prices.

Besides the cooling Chinese economy, traders have to deal with the uncertainty over Brexit and the partial shutdown of the U.S. government which is likely to have a larger impact on the economy than previously thought.

The markets are appear to be vulnerable to stock market weakness. Crude traders have been locked onto the stock market since Christmas, moving up with the strength in equities. Therefore, we feel that some of the negative fundamentals will take on more importance if a stock market sell-off begins to drag down crude oil prices.

Our near-term target for WTI crude oil is $48.14 to $46.85. Brent is likely to correct to $56.39 to $54.96.