Oil Price Fundamental Daily Forecast – Traders Eyeing Weaker US Dollar as Next Bullish Catalyst

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading nearly flat on Thursday with traders waiting for a fresh catalyst to drive prices higher.

Crude oil is up for the week, extending gains from the previous two sessions on signs of a strong economic rebound in China, the world’s top oil importer. It could come in the form of more good news from China or a weaker U.S. Dollar.

Traders appear to be waiting for the next catalyst to overcome worries over a rise in U.S. crude inventories and concerns over overall global demand.

At 06:00 GMT, April WTI crude oil is trading $77.58, down $0.11 or -0.14% and May Brent crude oil is at $84.25, down $0.06 or -0.07%. On Wednesday, the United States Oil Fund ETF (USO) settled at $68.05, up $0.84 or +1.25%.

Bullish:  Underpinned by Improving China Demand Recovery Expectations

WTI and Brent crude oil jumped about 1% on Wednesday after data showed manufacturing activity in China in February grew at the fastest pace in more than a decade, adding to evidence of an economic rebound in the world’s second largest economy after the lifting of strict COVID-19 restrictions.

Bullish:  Crude Oil Processed by Indian Refiners Reached Record Levels in January

Provisional government data on Wednesday showed crude oil processed by Indian refiners reached record levels in January, as the country boosted imports of Russian barrels that Western countries shunned.

Refinery throughput in the world’s third-largest oil importer and consumer reached 5.39 million barrels per day for January, the highest since Reuters records going back to 2009.

Bearish:  Wednesday’s Gains Were Capped by a Tenth Consecutive Week of Crude Stock Builds as Reported by the U.S. Government.

The U.S. Energy Information Administration (EIA) reported on Wednesday that U.S. crude inventories rose by 1.2 million barrels in the week-ending Feb. 24 to 480.2 million barrels, their highest level since May 2021. Analysts were looking for a 500,000-barrel gain.

The build would’ve been larger, but record exports of U.S. crude oil kept the build smaller than in recent weeks with shipments increasing to 5.6 million barrels per day (bpd) last week.

U.S. gasoline stocks fell by 900,000 barrels in the week to 239.2 million barrels, the EIA said, compared with analysts’ expectations for a 500,000-barrel rise.

Distillate stockpiles, which include diesel and heating oil, rose by 0.2 million barrels in the week to 122.1 million barrels, its most since January 2022, versus forecasts for a 500,000-barrel drop, the EIA data showed.

Short-Term Outlook

The key takeaway from the EIA report was that record exports kept crude oil supplies in line.

A widening of U.S. crude and Brent crude spreads contributed to a record 5.6 million barrels per day in U.S. crude exports last week, which resulted in a smaller build than in previous weeks.

Once the bullish China news plays out, traders will be looking for another catalyst. That catalyst is likely to be the U.S. Dollar.

The greenback received a boost throughout February as investors focused on additional rate hikes from the Fed. This kept a lid on oil demand but with the European Central Bank (ECB) and other central banks expected to continue to boost their benchmarks, the dollar’s gains could be capped. This could help push foreign demand for crude oil higher. Consider the U.S. Dollar the next wildcard.