OctaFX Crude Oil Market update: price continues rise on record-high U.S. exports

EIA Report

Yesterday, the U.S. Energy Information Administration (EIA) reported a crude oil inventory build of 2.5 million barrels (MMbbl) for the previous week. According to the Reuters survey, it was a "bearish surprise" as analysts expected an inventory build of just 1.0 MMbbl. 

Commercial crude oil inventories now stand at 439.9 MMbbl, above last year's level but still below the five-year average. The deficit has started to expand again, even though it is already quite large for this time of the year. Crude oil production was flat at 12.0 MMbbl per day. Overall, the production has remained unchanged for the past 28 weeks. Refined crude oil products are in deficit, especially distillate fuel oil. 
 

Source: OctaFX calculations based on EIA report
 

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Fundamentally, the situation in the market appears to be bullish. The OPEC+ production cuts and sanctions against Russia support the upward trend. Still, there are concerns that global economic growth is slowing down. It may be the reason the oil is still trading below $100/bbl. A Reuters survey indicates that the global GDP growth could slow to 2.3% in 2023. However, the Chinese economy may expand at 5.0% next year. In its latest Commodity Markets Outlook, the World Bank projected an average price of $92/bbl in 2023, easing to $80 in 2024 but above the five-year average of $60.
Meanwhile, the United States is working with other western nations toward finalizing the price cap for Russian crude. The cap is expected to be $63-64/bbl and should reduce oil revenues for Russia. However, it may also have an unintended negative effect on crude oil production in Russia, which would reduce the aggregate supply in the global market. 

Price Forecast

Oil prices rallied on Wednesday, with benchmark WTI closing 3.0% higher. Earlier today, oil continued to rally in response to record-high U.S. crude oil exports.

Technically, the U.S. WTI crude oil (OctaFX ticker: XTI) looks bullish. If it consolidates above the important $88.70 level, it will almost certainly attempt to test $90.10. Only a drop below $87.00 will mark the end of the rebound and will open the way toward the $85-83 range.

Source: OctaFX analytics using Trading View
Next OctaFX update is due on November 3, 2022.