Oil Price Prediction – WTI Oil Moves Higher Despite Rising Domestic Production

Key Insights

• The decline of crude inventories exceeded analyst expectations. 
• Domestic oil production grew from 11.9 million bpd to 12.1 million bpd. 
• U.S. continues to sell oil from the Strategic Petroleum Reserve, but demand stays strong, which is bullish for oil markets. 

WTI Oil Gains Ground After The Release Of The EIA Report

WTI oil is moving higher after the release of the EIA Weekly Petroleum Status Report, which indicated that crude inventories declined by 4.5 million barrels. Analysts expected that inventories would decrease by 1 million barrels.

At current levels, crude inventories are about 6% below the five-year average for this time of the year.

Total motor gasoline inventories declined by 3.3 million barrels, while distillate fuel inventories decreased by 0.8 million barrels.

Interestingly, domestic oil production increased from 11.9 million bpd to 12.1 million bpd, but this increase did not put any pressure on WTI oil.

An Additional SPR Release Fails To Put Pressure On WTI Oil

The U.S. continues its attempts to put pressure on the price of oil. The U.S. DOE has recently announced an additional sale of up to 20 million barrels of crude oil from the Strategic Petroleum Reserve (SPR).

In the previous week, SPR stocks declined from 480.1 million barrels to 474.5 million barrels. A year ago, SPR stocks stood at 621.3 million barrels.

The release of oil from the Strategic Petroleum Reserve put some pressure on the oil market in recent months. As a result of this action, the spread between WTI oil and Brent oil kept growing.

Today’s EIA report indicated that crude inventories declined despite rising domestic oil production and the release of oil from SPR. This is a sign of strong demand, which is bullish for oil.

In addition, it looks that the market questions the ability to hold prices below the $100 level with the SPR releases. The strategic reserve cannot be pushed to zero, so the U.S. will have to stop at some point. More, the U.S. will likely have to buy more oil to replenish the depleted reserves, which will provide additional support to WTI oil in the future.

In the near term, the key question is whether WTI oil is ready to move back above the psychologically important $100 level. In case WTI oil manages to settle above this level, it will attract more speculative traders and can quickly test the resistance near the $104 level.

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