Oil Price Prediction – Oil Drops Towards New Lows

Key Insights

• Crude inventories increased by 4.5 million barrels, driven by the strong increase in crude oil imports. 
• Domestic oil production stays at 12.1 million bpd despite the recent pullback in oil markets. 
• OPEC+ decided to increase its production target by 100,000 bpd, but the impact of this decision will be minimal. 

Crude Inventories Unexpectedly Increase

WTI oil found itself under pressure after the release of the EIA Weekly Petroleum Status Report, which indicated that crude inventories increased by 4.5 million barrels. Analysts expected that crude inventories would decline by 0.6 million barrels.

The increase was driven by crude oil imports, which averaged 7.3 million bpd, up by 1.2 million bpd from the previous week. Gasoline inventories grew by 0.2 million barrels, while distillate fuel inventories decreased by 2.4 million barrels.

Meanwhile, domestic oil production remained unchanged at 12.1 million bpd. This is not surprising as oil prices have settled below the $100 level in recent weeks, so there is less incentive to boost production to new highs.

OPEC+ Raises Production Growth Target By 100,000 Bpd

Today, OPEC+ decided to increase its production growth target by just 100,000 bpd despite pressure from the U.S. administration to put more oil into the market.

Importantly, this increase should be proportionally spread among group members. As some OPEC+ members are struggling to meet their current quotas due to production problems and previous underinvestment, the decision to increase production by an additional 100,000 bpd will not have any material impact on the oil market.

Meanwhile, it is clear that oil markets are worried by the slowdown of the world economy. Unlike the U.S. equity market, which has already rebounded towards June highs, oil market traders are worried that demand for oil may decline in the second half of this year. The U.S. sales from the strategic reserve put additional pressure on the market, although it should be noted that the spread between WTI oil and Brent oil has started to decrease.

Traders should watch whether the $90 level holds in the upcoming trading sessions. A move below this level may trigger a sell-off.

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