Oil Prices Forecast: EIA Revised Production Data, Inventories Set the Tone

Key Points

• Oil futures gain on slow U.S. production growth forecast.
• EIA report to show 1.7 million barrel inventory rise.
• Middle East unrest viewed as minor market influence unless supply is disrupted.

Crude Oil Futures Firm on Supply Data

On Wednesday, Brent and West Texas Intermediate (WTI) crude oil futures are trading higher, marking a potential third consecutive day of gains. This movement is largely attributed to the U.S. Energy Department’s updated data, showing a slower-than-expected growth in oil production for 2024, which has reduced concerns about oversupply.

At 06:05 GMT, Light Crude Oil Futures are trading $73.43, up $0.12 or +0.16%.

Supply and Weekly Inventory Reports

Recent data from the American Petroleum Institute (API) indicated a smaller increase in U.S. crude stocks than analysts had forecasted. This week, the market is focused on the Energy Information Administration’s (EIA) report, due later on Wednesday, expected to reveal a 1.7 million barrel rise in inventories. The EIA’s downward revision of U.S. oil output growth further suggests a tightening supply scenario.

Middle East Impact

Despite the ongoing geopolitical tensions in the Middle East and disruptions in key shipping areas like the Red Sea, traders are currently viewing these events as peripheral influences. Without a direct impact on oil supply, these developments are unlikely to significantly sway market prices.

Short-Term Forecast

In the short term, oil prices are predicted to experience modest fluctuations, maintaining levels close to current prices. The outlook remains cautiously bearish, with expectations of strong gasoline and diesel inventories. However, factors like refinery maintenance and disruptions, including the recent BP refinery outage, could limit supply. The market’s direction hinges on tangible supply changes, particularly if the Middle East turmoil escalates to affect oil production directly.

Technical Analysis

Light crude oil futures are currently straddling the 50-day moving average at $73.33 after another successful test of support at $72.48.

A sustained move over the 50-day MA will change the intermediate-term trend to up, while shifting the momentum of this week’s somewhat sideways trade. If this move attracts enough buyers on rising volume then look for a potential near-term trade into the 200-day moving average at $76.35.

The inability to overcome the 50-day MA will indicate the lack of buyers or renewed selling pressure. However, don’t expect much of a sell-off unless the selling is strong enough to take out the support at $72.48. If this occurs, we could see a near-term break into $70.00 then a mostly rangebound trade.