Yahoo News Oil Price Fundamental Daily Forecast – Coronavirus Fears Likely to Wipe Out 2019 Gains
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower for a fourth straight session, putting them in a position to challenge their December 24, 2018 lows that launched last year’s rally.
With the global demand picture weakening everyday as the coronavirus spreads around the world, OPEC not likely to make a decision on whether to make additional production cuts and U.S. supply growing, there are no strong reasons to think the markets can turnaround anytime soon.
At 09:38 GMT, April WTI crude oil is trading $49.25, down $0.65 or -1.30% and April Brent crude oil is at $54.11, down $0.84 or -1.53%.
Crude oil prices rose earlier in the session on short-covering and profit-taking, but then aggressive sellers erased those gains as fears deepened that the rapid spread of the coronavirus will lead to a global pandemic that could end up producing a global recession.
American Petroleum Institute Weekly Inventories Report
The API reported late Tuesday a smaller than anticipated crude oil inventory build of 1.3 million barrels for the week-ending February 21. Analysts were looking for a 3.0 million barrel build in inventory.
The API also reported a small build of 74,000 barrels of gasoline for the week-ending February 21, after last week’s 2.67-million-barrel draw. This week’s small build compares to analyst expectations for a 2.245-barrel draw for the week.
Distillate inventories were down by 706,000 barrels for the week, compared to last week’s 2.63-million-barrel draw, while Cushing inventories rose by 411,000 barrels.
Daily Forecast
As the coronavirus panic set in, traders are going to become more and more interested in how it affects global demand and less interested in weekly inventory reports. Furthermore, they don’t seem to care about the steep drop in Libyan output either and whether OPEC and its allies are going to trim production.
A week or two ago, I said that crude prices would jump if OPEC+ announced additional production cuts, but I’ve changed my mind about that. We may see some short-covering, but I don’t think the news will be enough to change the trend.
Furthermore, I’m not so sure OPEC+ will even agree to make any additional cuts in output since the move could be deemed irrelevant without final figures on the loss of demand. In other words, I think they are going to wait for the coronavirus to run its course and for governments to release fresh economic data as to its impact before they make across the board cuts. By then, there may not even by an OPEC+.
Finally, today’s U.S. Energy Information Administration (EIA) weekly inventories report is expected to show a 2.3 million barrel build.
This article was originally posted on FX Empire
