Oil Price Fundamental Daily Forecast – With Iran Sanctions Expected, U.S. Production Will Dictate Next Move

U.S. West Texas Intermediate and international-benchmark Brent crude oil tumbled on Tuesday after a private report showed high U.S. oil supplies. However, renewed concerns over Iran are helping to boost prices early Wednesday.

At 0743 GMT, June WTI crude oil is trading $67.67, up $0.42 or +0.62% and July Brent crude oil is at $73.43, up $0.30 or +0.41%.

According to the American Petroleum Institute (API), crude inventories rose by 3.427 million barrels to 432.575 million in the week to April 27. Analysts were looking for a smaller build of 739,000 barrels.

The API also reported a build in gasoline inventories for the week-ending April 27 of 1.602 million barrels. This part of the report was a surprise since traders were looking for a draw of 587,000 barrels.

Distillate inventories saw another draw this week of 4.083 million barrels. Analysts had forecast a smaller decline of 1.360 million barrels.

Forecast

Fundamental traders continue to clash which is helping to hold WTI and Brent crude oil futures in a trading range.

Bullish crude oil traders are hoping for sanctions against Iran. They expect this to lead to lower supply. The combination of this event and the success of the OPEC-led production cuts should help to underpin prices.

Bearish crude oil traders continue to bet on lower prices because of rising U.S. crude oil production. According to the most recent data available, U.S. crude oil production for the week-ending April 20 increased to 10.586 million barrels per day.

Today at 1430 GMT, the U.S. Energy Information Administration will release its latest data on crude inventories. It is expected to show a 1.0 million barrel increase.

Most traders expect President Trump to reimpose the sanctions on Iran. The recent price action suggests this event may already be priced into the market so the announcement could produce a two-sided move. At this point, concerns over rising U.S. production could take control and the markets could begin a short-term correction.