Crude oil forecast: EIA inventory eyed after API stocks build, China inventory releases

ETFS Brent Crude prices are extending lower through the Wednesday Asia-Pacific trading day after an overnight drop. WTI declined about 1.5% on Tuesday following Monday’s modest 0.17% loss. Brent prices – the global benchmark – are also facing downward pressure, although not as much as its US counterpart.

The underperformance in US prices likely owes to an inventory report that showed a larger-than-expected stockpiles buildup. The American Petroleum Institute (API) reported a 3.594 million barrel inventory build for the week ending October 29. That was more than 2 million barrels over what analysts expected, according to the DailyFX Economic Calendar.

Energy traders now shift their focus to the upcoming inventory report from the US Energy Information Administration (EIA). The government report – which normally follows the API numbers – typically commands more market attention. Analysts expect the figure to cross the wires at 2.225 million barrels for the week ending October 29. That would be a little more than half of the prior week’s 4.267 million barrel build. Imports and stocks at Cushing Oklahoma may also provide insights.

The Organization of the Petroleum Exporting Countries and its allies (collectively known as OPEC+) will hold a meeting later this week on November 4 to decide on production increases. Analysts expect the cartel to stay on course for a 400,000 barrel per day (bpd) increase. Kuwait and Iraq publicly supported that number, which makes the outcome all the more likely. However, a surprise decision of anything over 400k bpd would likely pressure prices.

OPEC is facing increasing political pressure to release additional supply into the market amid prices surging over $80 per barrel. Higher costs have sent gasoline and diesel prices soaring, which has only added to inflation woes. US President Joe Biden publicly called on OPEC to increase supply. Over the weekend, China stated it would release fuel reserves in response to a domestic diesel fuel shortage. The public announcement is thought to be a first for Beijing. That suggests the announcement may be designed with the effect to cool prices in and of itself.

Crude oil technical forecast

The price drop puts the 20-day Simple Moving Average (SMA) on the defense. Outside of intraday moves, prices haven’t traded below the key moving average since August. That said, a clean break below the level could open the door for more losses. The 38.2% Fibonacci retracement and the 80 psychological level would shift into focus if the 20-day SMA does give way. MACD and RSI are both tracking firmly lower, which suggests more weakness may be likely.