Oil Price Prediction – Oil Markets Decline As Domestic Production Grows

Key Insights

• WTI oil found itself under pressure after EIA data indicated that domestic oil production increased. 
• It remains to be seen whether the current upside trend will be broken as demand for energy will continue to grow ahead of July 4. 
• At this point, WTI oil remains stuck in the $100 – $120 range. 

Domestic Oil Production Grew To 12.1 Million Bpd

WTI oil  is losing ground after the release of the EIA Weekly Petroleum Status Report, which indicated that domestic production increased from 12.0 million bpd to 12.1 million bpd.

Last week, EIA did not release the Weekly Petroleum Status Report due to technical issues. This week’s report includes the data from the week ending June 17, which should have been released on June 23.

According to EIA, crude inventories declined by 2.8 million barrels from the previous week, while total motor gasoline inventories grew by 2.6 million barrels.  The increase in gasoline inventories served as a bearish catalyst for the oil market.

As noted above, domestic oil production has finally managed to get above the 12.0 million bpd level and reached 12.1 million. This is an important development as it shows that high prices have provided sufficient incentives for domestic producers to increase production.

What’s Next For WTI Oil?

WTI oil prices have been moving higher in recent trading sessions amid discussions about a potential price cap for Russian oil. Such price caps can push Russia to remove its oil from Western markets, pushing oil prices to new highs.

Today, the market’s attention has shifted to the growth of U.S. domestic production. The key question is whether U.S. companies are ready to raise production to new highs.

WTI oil has stayed above the $100 level since March, which indicates that high prices are sustainable and increases incentives to boost production.

At the same time, it remains to be seen whether the increase of domestic oil production will be sufficient enough to break the short-term upside trend in the oil markets.

Demand for energy will increase ahead of July 4, providing additional support to oil prices. From a big picture point of view, oil remains stuck in the $100 – $120 range, and it will need significant catalysts to move out of this range.

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