Oil Price Fundamental Daily Forecast – Choppy Trade after API Reports Stockpile Build Ahead of EIA Data

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Wednesday as traders await the release of this week’s government inventories report.

The catalysts behind the early session move are late Tuesday’s release of an industry report that showed U.S. crude stockpiles rose more than expected and an overnight drop in risk sentiment. Losses are being limited, however, by supply worries and a weaker U.S. Dollar.

At 06:00 GMT, December WTI crude oil futures are trading $84.77, down $0.55 or -0.64% and December Brent crude oil is at $92.74, down $0.78 or -0.83%. On Tuesday, the United States Oil Fund ETF (USO) settled at $70.64, up $0.26 or +0.37%.

American Petroleum Institute Weekly Inventories Data

Late Tuesday, the American Petroleum Institute (API) reported a crude oil build of 4,250 million barrels during the week-ending October 21. Traders were looking for a build of about 200,000 barrels.

The crude oil build included the Department of Energy’s release of 3.4 million barrels from the Strategic Petroleum Reserves (SPR) in the week-ending October 21, leaving the SPR with 401.7 million barrels.

The API also reported a draw in gasoline inventories this week of 2.278 million barrels for the week ending October 21, compared to the previous week’s 2.17 million-barrel draw.

Distillate stocks also saw a build this week of 635,000 barrels, compared to last week’s 1.09-million-barrel decrease.

Cushing inventories rose 740,000 barrels in the week to October 21.

Short-Term Outlook

Traders will get another piece of the current inventories puzzle at 14:30 GMT when the U.S. Energy Information Administration (EIA) releases its weekly inventories data. Traders are looking for a crude oil draw of about 300,000 barrels.

An unexpected build will be bearish for crude oil prices, while a deeper than expected draw could fuel an intraday short-covering rally.

A rise in crude oil inventories will reinforce fears of a global recession that would cut demand. This is potentially bearish. However, losses will likely be limited due to upcoming supply restraints.

In November, the recently announced OPEC+ production cuts will begin, while in December, the fresh European Union (EU) embargo on Russian energy products will be strictly enforced.

Our work suggests that the longer the markets remain in a trading range, the greater the chances of an upside breakout in November and December, once the impact of the OPEC+ production cuts and the EU oil embargo is felt.