Oil Price Fundamental Daily Forecast – Unexpected EIA Build, COVID-Related Demand Worries Pressure Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures fell on Friday, pressured by a surprise build in U.S. crude inventories and concerns that new pandemic restrictions in China will curb fuel demand in the world’s biggest oil importer.

Meanwhile, U.S. energy firms this week added oil and natural gas rigs for a ninth week in a row amid higher energy prices over the past few months, but the overall count is still 52% below this time last year.

On Friday, March WTI crude oil settled at $52.27, down $0.86 or -1.62% and March Brent crude oil finished at $55.41, down $0.69 or -1.25%.

Energy Information Administration Weekly Inventories Report

U.S. crude oil stockpiles rose unexpectedly last week, while refineries hiked output to their capacity usage since March, the Energy Information Administration (EIA) said on Friday

Crude inventories rose by 4.4 million barrels in the week to January 15, compared with analysts’ expectations for a decrease of 1.2 million barrels.

Refinery utilization rates rose by 0.5 percentage points to 82.5% of total capacity, their highest since March, EIA data showed, a potential signal of optimism that demand will rebound in coming months. Refinery crude runs rose by 110,000 barrels per day.

Crude stocks at the Cushing, Oklahoma, delivery hub for futures fell by 4.7 million barrels to 52.5 million barrels, their lowest since August, the EIA said.

Gasoline stocks fell by 260,000 barrels, compared with analysts’ expectations in a Reuters poll for a 2.8 million-barrel gain.

Distillate stockpiles, which include diesel and heating oil, rose by 458,000 barrels, versus expectations for a 1.2-million-barrel increase, the EIA data showed.

Net U.S. crude imports rose the week-ending January 15 by 566,000 bpd.

Fuel Demand Support is Fading

Recovering fuel demand in China underpinned market gains late last year while the United States and Europe lagged, but that source of support is fading as a fresh wave of COVID-19 cases in China and the Euro Zone sparked new restrictions.

“The pandemic seems to continue to expand into a second wave in China, with infections rising by the day and reaching again different regions such as Shanghai,” said Rystad Energy Oil markets analyst Louise Dickson.

Meanwhile, travel on U.S. roads fell 11% in November, a steeper decline over October road use as coronavirus cases increased, the U.S. Transportation Department said Friday.

US Oil Rig Count Up a 9^th Week in a Row – Baker Hughes

Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil rose by 2 to 289 this week. That followed increases in each of the last eight weeks. The total active U.S. rig count, which includes those drilling for natural gas, was also up 5 to 378, according to Baker Hughes.

Short-Term Outlook

Longer-term the OPEC+ output cuts and Saudi Arabia’s voluntary production cuts in February and March should underpin prices, but short-term, prices could correct into a value area because speculative buyers may have driven the market well ahead of the fundamentals.

For a look at all of today’s economic events, check out our economic calendar.