Yahoo Finance Oil Price Fundamental Daily Forecast – Crude Oil Firms on Bigger-than-Expected API Draw
International-benchmark Brent crude oil surged to a 2 ½ year high on Tuesday then plunged as traders took profits after prices soared on an unplanned closure of the pipeline that carries the largest North Sea crude oil grade. The U.S. West Texas Intermediate crude oil futures contract fell in sympathy with the Brent contract.
On Tuesday, February Brent crude oil settled at $63.34, down $1.35 or -2.09% and January WTI crude oil closed at $57.14, down $0.85 or -1.47%.
Selling pressure increased after the U.S. Energy Information Administration said its monthly short-term energy outlook that U.S. crude oil output will rise by 780,000 barrels per day (bpd) to 10.02 million bpd in 2018. Last month, the EIA expected a 720,000 bpd year-over-year increase to 9.95 million bpd.
Earlier in the week, the Forties pipeline, which carries crude from the North Sea to a processing terminal in Scotland, was shut after cracks were found. Brent crude oil futures rallied sharply on the news in reaction to what traders are saying is the first unplanned outage for some years in the line, which was scheduled to pump 406,000 barrels per day (bpd) in December.
Forecast
January WTI and February Brent crude oil posted major potentially bearish technical closing price reversal tops on Monday, but the chart pattern has to be confirmed in order to make it relevant to the short-term price action. In addition to confirming the chart pattern, taking out yesterday’s low will essentially erase all of the bullishness created by the shutdown of the pipeline.
Yesterday’s price action affirms the premise that the crude oil markets are headed into a volatile time period where investors are going to battle over falling supply due to the OPEC-led production cuts and rising production from U.S. drillers.
In other news, industry group the American Petroleum Institute said on Tuesday that crude stocks fell by 7.4 million barrels, more than expected. However, gasoline stocks were up by 2.3 million barrels, and distillate inventories rose by 1.5 million barrels, compared with expectations for a 902,000-barrel gain, the API data showed.
Early Wednesday, WTI and Brent are trading inside yesterday’s ranges. This suggests investor indecision and impending volatility. Traders are likely to make up their minds following the release of the U.S. Energy Information Administration’s weekly inventories report at 1530 GMT. It is expected to show a draw of 3.8 million barrels for the week-ending December 8. A bigger-than-expected draw will be bullish, however, the size of the gains will likely be determined by the gasoline and distillate numbers.
This article was originally posted on FX Empire
