Oil Price Fundamental Daily Forecast – Underpinned by API Crude, Gasoline Draw, Stimulus Hopes

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures hit an 11-month high on Wednesday, shortly before the regular session opening and ahead of the weekly government inventories report.

The catalyst behind the move was a private industry report that showed a draw in U.S. crude and gasoline stocks. The news was solid enough to offset an OPEC+ forecast that said the market will be in deficit in 2021.

At 11:47 GMT, March WTI crude oil futures are trading $55.05, up $0.29 or +0.53% and April Brent crude oil is at $57.94, up $0.48 or +0.84%.

American Petroleum Institute Weekly Inventories Report

The API reported late Tuesday a draw in crude oil inventories of 4.261 million barrels for the week-ending January 29, along with gasoline, distillate and Cushing draws as well. Analysts were looking for an inventory build of 446,000 barrels for the week.

The API also reported a draw in gasoline inventories of 240,000 barrels for the week-ending January 29 – compared to the previous week’s 3.058-million-barrel build. Analysts had expected a 1.134-million-barrel build for the week.

Distillate stocks saw a decrease of 1.622 million barrels for the week, adding onto last week’s 1.398-million-barrel in increase, while Cushing inventories fell by 1.885 million barrels.

U.S. oil production dipped 100,000 bpd to 10.9 bpd, according to the Energy Information Administration (EIA), ending a six-week streak of 11 million barrels daily.

Latest Assessment from OPEC+

Prices were also underpinned by the latest assessment by OPEC+ that the oil market could be in deficit throughout this year, a document seen by Reuters on Tuesday showed.

“Underpinning the bullish sentiment are tightening fundamentals. Ahead of today’s ministerial meeting, OPEC+ hinted that global oil stockpiles will decline below the five-year average by June,” PVM analysts said.

The ministerial meeting will convene on Wednesday, although it is not expected to recommend any adjustments to oil output policy.

Daily Forecast

The crude oil market is strong with buyers willing to come in on nearly every dip since October. The contract’s “backwardation” structure, where oil for nearby delivery is more expensive than further forward, was near a one-year high at more than $2, indicating expectations of tighter supply.

Prices are also being bolstered by news that Democrats in the U.S. Congress took the first steps toward advancing President Joe Biden’s proposed $1.9 trillion coronavirus aid plan without Republican support.

Later today at 15:30 GMT, the U.S. Energy Information Administration (EIA) will release its weekly inventories data. The report is expected to show a 600,000 barrel drawdown.

For a look at all of today’s economic events, check out our economic calendar.