Yahoo Finance Oil Price Fundamental Daily Forecast – Could Weaken Further as Buyers Search for Value
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures settled higher on Thursday after reaching their lowest levels since mid-November. Technical factors may have played a role in the move since the markets had reached so-called oversold territory.
January WTI crude oil futures settled at $56.69, up $0.73 or +1.30% and February Brent crude oil futures finished the session at $62.20, up $0.98 or +1.60%.
Buyers may have also showed a delayed reaction to Wednesday’s U.S. Energy Information Administration’s weekly inventories report which showed a bigger than expected drop in crude oil stocks. Traders may have also overreacted to a massive rise in gasoline and distillate stocks, drawing the attention of bargain-hunters.
Forecast
Despite the comeback rally on Thursday, crude oil is trading well-below the levels hit late last week after the OPEC-led producers decided to extend their production cut deal to the end of 2018. This is a sign that investors are more concerned about rising U.S. production than OPEC’s ability to reduce output.
Crude oil inventory wasn’t the issue this week, but the steep rise in gasoline inventories was.
According to the U.S. Energy Information Administration, U.S. crude oil inventories fell by 5.6 million barrels in the week to December 1, to 448.1 million barrels, putting stocks below seasonal levels in 2015 and 2016.
However, gasoline stocks rose 6.8 million barrels, to 220.9 million barrels, much more than analyst expectations for a gain of 1.7 million barrels. The jump in gasoline stocks suggests that refiners may not need to process as much crude in the future.
The EIA report also showed that U.S. production increased again. The government said U.S. crude production climbed by 25,000 barrels per day (bpd) to 9.71 million bpd, the highest since monthly figures showing the United States produced more than 10 million bpd in the early 1970s.
The trend changed to down on the daily charts this week, which could be an indication that investors are looking for value, now that the bullish OPEC news is out there. This event may encourage the hedge funds to pare positions and play for cheaper prices.
Additionally, investors are worried that soaring U.S. output will threaten to undermine efforts led by OPEC and Russia to bring production and demand into balance following years of oversupply.
At this time, the crude oil market is susceptible to heavy fund liquidation so I’m looking for prices to continue to weaken.
This article was originally posted on FX Empire
