Oil Price Fundamental Daily Forecast – Higher as Traders Shrug Off API Build Ahead of EIA Data

U.S. West Texas Intermediate crude oil and international-benchmark Brent crude oil are edging higher on Thursday after posting a steep loss the previous session due to rising interest rate fears and a possible demand destructive recession. Meanwhile, bullish Russian supply curbs are being capped by an expected rise in U.S. inventories.

At 12:57 GMT, April WTI crude oil futures are trading $74.87, up $0.92 or +1.24% and April Brent crude oil is at $81.52, up $0.92 or +1.14%. On Wednesday, the United States Oil Fund ETF (USO) settled at $64.93, down $1.76 or -2.64%.

Fed Interest Rate Fears

Yesterday’s Federal Reserve minutes showed that policymakers would prefer to hike rates in smaller increments so that they could calibrate incoming data more closely. Fed officials also stood united in the need to continue to raise interest rates until inflation comes down to their 2% mandate.

With the Fed expected to raise rates 25 basis points in March, May and June, crude oil traders fear that the moves will push the economy into an eventual contraction or perhaps a recession. This would put a strain on crude oil demand and consequently weaken prices.

American Petroleum Institute Weekly Inventories Data

Crude oil inventories saw another substantial rise this week, with a 9.895 million barrel increase the week-ending Feb. 17, the American Petroleum Institute (API) data showed late Tuesday.

U.S. crude oil and fuel inventories rose by 9.9 million barrels last week, according to the API. U.S. crude oil inventories have climbed every week since mid-December, stoking worries over demand. A Reuters poll had forecast a 2.1 million barrel increase in crude stockpiles last week.

Gasoline inventories rose by 894,000 barrels after last week’s API data showed the fuel inventories rising by 846,000 barrels. Distillates rose 1.374 million barrels after rising by 1.728 million bpd in the week prior.

Russia to Cut Supply

Providing support today is Russia’s plans to cut oil exports from its western ports by up to 25% in March, exceeding its announced production cuts of 500,000 barrels per day.

Also helping to underpin prices is China’s on going demand recovery.

Short-Term Outlook

Although the threat of more interest rate hikes and a possible recession are weighing on prices this week, we expect to see value seeking traders step in to support the market. Their motivation is lower Russian production and China’s reopening. Both moves are expected to tighten the market and offset any oversupply concerns.

Today’s U.S. Energy Information Administration Weekly inventories report is expected to show a 2.9 million barrel rise in crude oil stockpiles. The EIA report will be released at 16:00 GMT.