Oil Price Fundamental Daily Forecast – EIA Crude Inventories Data Sets Early Tone

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Wednesday, but inside yesterday’s range, suggesting investor indecision and impending volatility.

The markets are being underpinned by falling U.S. crude inventory figures from the American Petroleum Institute (API), a weaker U.S. Dollar and an improving outlook for China’s demand and economy.

At 09:17 GMT, January WTI crude oil is trading $79.15, up $0.95 or +1.21% and February Brent crude oil is at $85.24, up $0.99 or +1.18%. On Tuesday, the United States Oil Fund ETF (USO) settled at $68.34, up $1.46 or +2.18%.

Capping crude oil prices are concerns that OPEC+ would leave output unchanged at its upcoming meeting. Earlier in the week, prices spiked higher on rumors the group would announce another cut in output.

Prices Supported by Large Inventory Draw

Crude oil prices jumped on the opening on Wednesday after the American Petroleum Institute (API) reported a 7.85 million barrel draw during the week-ending November 25. Analysts anticipated a 2.487 million barrel draw.

The API reported a build in gasoline inventories this week of 2.85 million barrels for the same week, after the previous week’s 400,000-barrel draw. Distillate stocks also saw a build this week of 4.01 million barrels, compared to last week’s 1.1-million-barrel increase.

Cushing inventories fell 150,000 barrels in the week to November 25, compared to last week’s reported decrease of 1.4 million barrels.

Encouraging News from China

There was very little reaction to China’s week PMI data released overnight. This suggests traders may have already priced in the negative news.

China also reported fewer COVID-19 infections than on Tuesday, amid market speculation of weekend protests possibly prompting loosening in COVID-19 movement restrictions. Guangzhou, a southern city, relaxed COVID prevention rules in several districts on Wednesday.

Both events could help stabilize the economy and demand for crude oil.

Short-Term Outlook

Traders will get the opportunity to react to the latest inventories data from the Energy Information Administration (EIA) at 15:30 GMT. The report is expected to show a 3.2 million barrel drawdown of crude oil.

Later in the session at 18:30 GMT, Fed Chair Jerome Powell is scheduled to speak about the economy and labor market at a Brookings Institution event. Investors will be looking for clues about when the Fed will slow the pace of its aggressive rate hikes.

Crude oil traders should pay attention to Powell because his remarks should have an impact on the U.S. Dollar. A hawkish Powell will support the greenback and perhaps put pressure on dollar-denominated crude oil. A less-hawkish Fed could drive down the dollar, leading to increased demand for crude oil.