Oil Price Forecast | Fundamental Analysis for December 29, 2016


Oil Price Forecast : Fundamental Analysis for December 29, 2016

Early in the session, investors seemed positive about the long side of the market in anticipation of OPEC’s planned production cuts on January 1. I don’t think this was an issue today since the majority of traders believe that 100% of the OPEC and non-OPEC countries involved in the program are expected to adhere to the rules at the onset.

Starting January 1, OPEC and non-OPEC producers are expected to lower production by almost 1.8 million barrels per day (bpd). The success of the program relies on 100% cooperation.

In other news, Iraqi Oil Minister Jabar Ali al-Luaibi said his country would cut supply by 200,000 to 210,000 bpd in January. Last week, Saudi Arabia and Kuwait said they had already told customers to expect supply reductions.

Forecast for Today

Crude oil prices could fall on Thursday, after hitting 18-month highs in some contracts on Wednesday, in reaction to the American Petroleum Institute’s (API) weekly report that showed a build of 4.2 million barrels in U.S. commercial crude inventories the week-ending December 23. Traders were looking for a 1.5 million-barrel draw.

The API data also showed a 2.8 million barrel draw to gasoline stockpiles. This was larger than the one million barrel draw that was predicted.

Crude levels at Cushing, Oklahoma rose for the fourth time in five weeks. During the week-ending December 23, inventories rose 528,000 barrels, in line with expectations.

Lastly, the API reported that distillate inventories came in at 1.7 million barrels.

According to the experts, Thursday’s EIA report is expected to show at 1.3 million barrel draw down.

Due to the thin trading conditions, I expect the markets to follow the bearish API data early in the session. The move the rest of the day will be determined by trader reaction the EIA report.