Oil Price Fundamental Daily Forecast – Will EIA Inventories Report Show Surprise Build?

U.S. West Texas Intermediate and international-benchmark Brent crude oil surged on Tuesday in reaction to a bullish statement from the International Monetary Fund (IMF) from Monday.

On Tuesday, March WTI crude oil settled at $64.47, up $0.90 or +1.42% and April Brent crude oil finished at $69.54, up $0.91 or +1.33%.

The IMF revised upward is forecast for world economic growth to 3.9 percent for both 2018 and 2019, a 0.2 percentage point increase from its last update in October.

Tuesday’s rally caught traders by surprise because the IMF news came out on Monday so the move was a delayed reaction. The rally also took place on a day that two banks came out with bearish forecasts.

French bank BNP Paribas said “The outlook for 2018 is roughly balanced for most of the year, but inventories are set to rise in Q4 2018.”

It also raised its 2018 oil price forecasts by $10 a barrel, expecting WTI to average $60 and Brent $65, but it also said there have been signs of a possible price correction.

Barclays said it expected Brent to average $60 a barrel this year, $5 above its previous forecast, due to strong demand growth and falling output from OPEC-member Venezuela. However, it also said it had “a bearish view on oil prices for the quarters ahead.”

Forecast

Crude oil prices are trading sideways-to-lower early Monday in reaction to a surprise inventories build in a private industry report.

The American Petroleum Institute (API) reported a surprise build of 4.755 million barrels of U.S. crude oil inventories for the week-ending January 17. Traders were looking for a drawdown of 1.6 million barrels. The news ended the streak of seven consecutive weekly draws.

The API also reported another build in gasoline inventories of 4.117 million barrels for the week-ending January 17. Traders were estimating a build of 2.486-million-barrels.

Distillates actually decreased by 1.280-million barrels during the reporting week. Traders forecast a 1.471-million-barrel decline.

Later today at 1530 GMT, the U.S. Energy Information Administration will release its weekly inventories report. They are looking for a draw of about 1.0 million barrels.

Prices could tumble on Wednesday if the EIA reports a surprise build. However, we could see another spike higher due to aggressive hedge fund buying if the report shows a bigger-than-expected decline.