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Crude Oil Forecast: EIA Data in Focus After API Stockpiles Build

Crude Oil Forecast: EIA Data in Focus After API Stockpiles Build

Thomas Westwater, Analyst

Crude Oil, Inventory, EIA Data, OPEC – Talking Points

  • Crude oil prices moderate after API shows inventory increase
  • EIA data in focus as fundamental narrative remains supportive
  • Technical picture suggests prices need to cool before next move

Oil benchmark prices rose overnight but started to ease through Asian trading. Traders are digesting a bigger-than-expected US inventory build. The American Petroleum Institute (API) reported overnight a 3.294 million barrel increase in crude oil stocks for the week ending October 15. That was down from the prior week’s 5.213 million barrel build, but it was over 1 million more than what analysts expected.

The ongoing economic recovery has bolstered global demand, which has pushed oil prices higher – although there are signs that growth is beginning to moderate. Nonetheless, demand is forecasted to continue its upward trajectory. That, along with OPEC keeping a tight grip on supply and lackluster investment elsewhere, will likely keep the oil market in deficit (where demand outpaces supply) into the first half of 2022.

Moreover, An ongoing energy crunch across Europe and Asia – exacerbated by soaring natural gas prices – added another tailwind to prices recently. Some power plants have turned to oil products in place of more traditional energy sources such as natural gas and coal as prices surge. All of this together is likely to keep prices elevated. Higher inventories may still weigh on prices, although the fundamental backdrop remains supportive for higher prices beyond short-term fluctuations.

That said, energy traders are focused on the upcoming inventory report from the US Energy Information Administration (EIA). This report follows the API’s numbers but typically commands more attention from markets. Analysts expect crude oil inventories to rise by 1.28 million barrels for the week ending October 15. A larger-than-expected figure could weigh on prices through the rest of the week.

Crude Oil Technical Forecast

Prices are scaling back after hitting a fresh multi-year high overnight. The Relative Strength Index (RSI) is moving lower within overbought territory, while MACD nears a cross below its signal line. This suggests prices may need a period to cool off. A drop to the 9-day Exponential Moving Average (EMA) may be on the cards, with prices currently gyrating around the 161.8% Fibonacci extension from the late-July/August move.

Crude Oil Daily Chart

crude oil chart, westwater thomas

Chart created with TradingView

--- Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwateron Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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