Oil Price Fundamental Daily Forecast – API Reports Massive Weekly Drawdown

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures rose on Tuesday. WTI crude reached its highest level since December 2014, underpinned by OPEC-led production cuts and expectations of another draw in U.S. crude inventories.

February WTI Crude Oil settled at $62.96, up $1.23 or +1.99% and March Brent Crude Oil finished the session at $68.82, up $1.04 or +1.53%.

In other news, the U.S. Energy Information Administration said world oil demand in 2018 is set to grow by an additional 100,000 barrels per day. The forecast, which was part of the agency’s Short-Term Energy Outlook for January, also said that the 2019 demand figure would stand at 101.76 million bpd – an increase of 1.65 million bpd from the current year.

“U.S. crude oil production is forecast to average 10.3 million b/d in 2018, which would mark the highest annual average production in U.S. history, surpassing the previous record of 9.6 million b/d set in 1970,” the report said. “EIA forecasts production to increase to an average of 10.8 million b/d in 2019 and to surpass 11 million b/d in November 2019.”

Forecast

Crude oil futures are trading higher early Wednesday in reaction to another bullish inventories report from the American Petroleum Institute (API).

The API reported late Wednesday an extremely large draw of 11.19 million barrels of United States crude oil inventories for the week-ending January 5, marking six straight draws in as many weeks. Analysts were looking for a much smaller drawdown of 3.89 million barrels in crude oil.

The API report also showed another build in gasoline inventories of 4.338 million barrels for the week-ending January 5. Analysts had expected a smaller, 2.625-million-barrel build.

Distillate inventories also saw a build this week of 4.685 million barrels, against a forecast of a 1.464-million-barrel build.

It look likes the hedge funds are on the right side of the market. The price action indicates crude oil is being driven higher by strong momentum. The rally will continue until speculators decide prices are too high to buy strength and that buying a dip will give them more bang for their buck.

On Wednesday, the U.S. Energy Information Administration will release its inventories report for the week-ending January 5. It is expected to show a 3.9 million barrel draw, down from the previous week’s 7.4 million barrel decline. However, the forecast can change, given the API number.