Daily Fundamental Oil Price Forecast – Prepared for a near term correction, but bullish factors remain intact
US West Texas Intermediate crude oil futures and the international benchmark Brent were down slightly on Thursday after giving up earlier gains on profit taking. Price action reflects the current early-session theme of falling demand for riskier assets, with stocks weakening as well as commodity-linked assets, as silver moves towards the safe haven Japanese yen.
At 08:20 GMT, December WTI crude oil futures are trading at $ 82.81, down $ 0.61 or -0.73% and December Brent crude is at $ 84.99, down $ 0.83 or -0.97%.
While markets may enter a short-term correction mode, they remain well supported for further long-term bullish actions. The lack of significant increases in supply from the United States or OPEC is one reason to expect higher prices. The other is the expectation of strong demand linked to the switch to fuel oil from coal and gas by electricity producers in a context of soaring prices.
US crude, lower fuel stocks, tight supply as demand remains strong – EIA
U.S. crude and fuel inventories tightened further last week, as gasoline supplies hit two-year low and inventories at America’s largest commercial storage facility fell to their lowest in three years, the Energy Information Administration (EIA) announced on Wednesday.
Crude inventories fell 431,000 barrels during the week of Oct. 15 to 426.5 million barrels, compared to analysts’ expectations in a Reuters poll for a rise of 1.9 million barrels.
U.S. gasoline inventories fell 5.4 million barrels more than expected during the week to 217.7 million barrels, the lowest since November 2019, the EIA said.
Distillate inventories, which include diesel and heating oil, fell 3.9 million barrels, putting their inventories at their lowest level since April 2020.
OPEC will stay the course
Crude oil prices have been strong for over a year as supply tightened, with the Organization of the Petroleum Exporting Countries (OPEC) maintaining a slow increase in supply rather than stepping in to add more barrels on the market.
Last week, OPEC leader Saudi Arabia rejected calls for a faster increase in oil production, saying its efforts with its allies were sufficient and protected the oil market from sharp price swings. observed in the natural gas and coal markets.
OPEC and its allies have done a “remarkable” job as “the so-called regulator of the oil market,” he said.
Crude oil could feel slight pressure on Thursday if the “no risk” tone continues. The dollar could also recover from a one-week selloff, which could reduce foreign demand for dollar-denominated crude, at least in the near term. But the move is not expected to last long or lead to a major trend change. Instead, it will likely ease some of the upward pressure that could lead to a technically oversold market.
In addition, futures contracts are currently on an offset, where future date contracts are trading at a lower price than the current contract. This encourages companies to sell oil immediately rather than storing it.
It also prevents large accumulations of supply, which is bullish for crude prices.
With the long term trend pointing to the upside, the markets should stay in “buy down” mode for some time.