Oil Price Fundamental Daily Forecast – EIA Outlook Uncertain after API Reports Surprisingly High Build

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are lower on Wednesday as traders brace for the latest government inventories data. This report could trigger a volatile response if it concurs with yesterday’s bearish private industry report.

Meanwhile, worries about lower demand will not go away as long as China continues to report a growing number of COVID-19 cases.

At 13:09 GMT, December WTI crude oil futures are trading $88.09, down $0.82 or -0.92% and January Brent crude oil is at $94.47, down $0.89 or -0.93%. On Tuesday, the United States Oil Fund ETF (USO) settled at $74.47, down $2.09 or -2.73%.

American Petroleum Institute Reports Bigger-Than-Forecast Build

The American Petroleum Institute (API) reported a large build late Tuesday for crude oil of 5.618 million barrels for the week-ending November 4. Traders were anticipating a 1.4 million increase.

U.S. crude inventories have grown by roughly 31 million barrels so far this year, according to API data, while the U.S. Strategic Petroleum Reserves (SPR) fell by more than six times that figure, at 197 million barrels.

Oilprice.com reported that the build in crude oil inventories was partially due to the Department of Energy’s release of 3.6 million barrels from the Strategic Petroleum Reserves in the week ending November 4, leaving the SPR with 396.2 million barrels.

In other news, the API also reported a build in gasoline inventories this week of 2.553 million barrels for the week ending November 4, compared to the previous week’s 2.64 million-barrel draw.

Distillate stocks saw a draw this week of 1.773 million barrels, compared to last week’s 865,000-barrel increase.

China Reports More COVID Cases

Last week, crude oil speculators bet heavily on the possibility China would begin relaxing its COVID restrictions, but they may have acted too soon since COVID cases in Guangzhou and other Chinese cities have surged.

This news is creating uncertainty which is clouding the demand outlook, putting pressure on prices.

Short-Term Outlook

Traders are now bracing for today’s U.S. Energy Information Administration’s (EIA) weekly inventories report, due to be released at 15:30 GMT. It is expected to show a 300,000-barrel crude oil build.

A larger-than-expected build could put additional pressure on crude oil prices into the close. A smaller-than-expected build could trigger an intraday short-covering rally.

WTI crude oil is under pressure because of the increase in supply and a possible drop in demand. Both events are short-term factors, however. Longer-term, the market is expected to be supported by the current OPEC+ production cuts and the European Union’s plan to block the sale of Russian oil on the open market.

So while prices could fall over the near-term, buyers would likely step in once the market reaches an attractive value area.