Oil Price Fundamental Daily Forecast – Dovish Powell Will Set Bullish Tone

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading flat on Tuesday after testing their highest level since January 27. Today’s bullish catalysts are concerns about limited spare capacity in the market and uncertainty over Russian supplies. Both are offsetting mixed oil data from top crude importer China.

At 08:30 GMT, April WTI crude oil is at $80.30, down $0.16 or -0.20%, and May Brent crude oil is at $85.99, down $0.20 or -0.23%. On Monday, the United States Oil Fund ETF (USO) settled at $70.51, up 0.65 or +0.93%. WTI traders should roll over to the May futures contract on Wednesday.

Traders are also watching the U.S. Dollar, which could be influenced by comments from Federal Reserve Chairman Jerome Powell early Tuesday and inventory data from the American Petroleum Institute (API) in the afternoon.

Worrisome comments on tight supply from Chevron’s CEO are also driving the bullish tone.

China Crude Imports Fall

China’s crude oil imports fell 1.3 percent in the first two months of 2023 from a year earlier; data showed Tuesday.

Imports from January-February totaled 84.06 million tons, or about 10.40 million barrels per day, according to the General Administration of Customs. China imported 10.53 million bpd in the same period last year.

Customs did not give a breakdown for the individual months, but analysts who track shipping data said China’s January imports were below year-earlier levels.

Chevron CEO Warns About Supply Disruptions

Chevron Corp Chief Executive Mike Wirth said at a conference in Houston on Monday that ships carrying Russian crude and products now have to travel long distances to reach non-sanctioned markets while oil inventories and swing supplies are limited, making the global market vulnerable to an unexpected supply disruption.

Short-Term Outlook

Earlier in the session on Tuesday, crude oil traders will be eyeing the testimony of Federal Reserve Chairman Jerome Powell, hoping he clarifies his outlook for the economy and the duration of the Federal Reserve’s interest rate hiking campaign.

If Powell is hawkish, then Treasury yields could rise, making the U.S. Dollar a more attractive investment. A stronger greenback could weigh on foreign demand for dollar-denominated crude oil.

Late Tuesday, the API will release the first of two reports on crude and product inventories for the week of March 3. According to a preliminary Reuters poll on Monday, the reports are expected to show decreases.

This could be the first decrease in 10 weeks, considering earlier official Energy Information Administration (EIA) data.