Oil Price Fundamental Daily Forecast – Bearish API Data Could Trigger Another Spike to Downside
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower early Wednesday, extending yesterday’s steep sell-off that was fueled by rapidly rising supply and renewed concerns over lower global demand.
Since hitting a four-year high on October 3, crude oil has lost more than 25 percent of its value, putting it in a bear market. The plunge in prices also represents one of the worst declines since a massive price collapse in 2014.
At 0704 GMT, January WTI crude oil is trading $55.66, down $0.18 or – 0.32%, and January Brent crude oil is at $65.34, down $0.13 or -0.20%.
For the week, as of Tuesday’s close, WTI is down $4.52 or -7.49% and Brent is lower by $4.71 or -7.19%.
Oil prices are getting hit by both rising supply and falling demand.
On the supply side, a surge in U.S. production is contributing to rising stockpiles. Additionally, on Tuesday, the U.S. Energy Information Administration said U.S. crude oil output from its seven major shale basins is expected to hit a record of 7.94 million barrels per day (bpd) in December.
Earlier in the month the EIA reported that U.S. production reached a record 11.6 million bpd and should hit 12.0 million bpd in early 2019. The surge in production has made the U.S. the world’s biggest producer. Combined with Saudi Arabian and Russian production, the big three account for a third of the world’s daily consumption.
Fear of lower demand is being driven by the strong U.S. Dollar which is making dollar-denominated crude oil very expensive for emerging market countries. Some traders are also worried that U.S. trade disputes will lead to a global economic slowdown.
Forecast
Although OPEC has been making increasingly frequent public statements about cutting production in 2019, so far it’s just been talk with little substance. Traders know that a production cut is the only way to stop the supply glut, but they aren’t going to react until a formal agreement has been reached and this may not occur for over a month.
Additionally, any talk of production cuts will likely raise the ire of President Trump who may have single-handedly driven prices lower on Monday when he told OPEC not to cut production.
Later on Wednesday, investors will get the opportunity to react to the latest inventories report from the American Petroleum Institute. During the week-ending November 2, the API reported that U.S. crude stocks climbed by 7.8 million barrels. Another large increase could spike prices lower late in the session.
On Thursday, the U.S. Energy Information Administration will release its weekly stats.
Prices may be oversold technically, but it’s going to take a major change in the fundamentals to flip this market.
This article was originally posted on FX Empire
