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Oil Price Fundamental Daily Forecast – Prices Surge as Crude Inventories Plunge Amid Jump in Refining Activity

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Wednesday following the release of a government report that showed a bigger-than-expected drawdown in crude supplies. The market was supported earlier in the session as OPEC upwardly revised its demand forecasts and better-than-expected news from the American Petroleum Institute (API) late Tuesday.

At 16:00 GMT, June WTI crude oil is trading $62.98, up $2.74 or +4.55% and June Brent crude oil is at $66.36, up $2.69 or +4.22%.

US Energy Information Administration Weekly Inventories Report

U.S. crude oil stockpiles dropped more than expected as refiners increased activity heading into the summer driving season, the Energy Information Administration (EIA) said on Wednesday.

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Crude inventories fell by 5.9 million barrels in the week to April 9 to 492.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.9 million-barrel drop.

U.S. gasoline stocks rose 309,000 barrels in the week to 234.9 million barrels, less than analysts’ expectations for a 786,000-barrel rise.

Distillate stockpiles, which include diesel and heating oil, fell by 2.1 million barrels versus forecasts for a 971,000-barrel rise, the EIA data showed.

Refinery utilization rates rose by 1 percentage point to 85% of overall capacity. That is the highest since March of last year, just before the coronavirus pandemic caused refiners to severely restrict processing activities as demand dove.

Net U.S. crude imports rose last week by 443,000 barrels per day. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 346,000 barrels in the last week, the EIA said.

Demand Predictions Move to Forefront

The International Energy Agency (IEA) predicted global oil demand and supply were set to rebalance in the second half of the year and that producers may then need to pump an additional 2 million barrels per day (bpd) to meet the expected demand.

Similarly, the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday raised its global demand forecast by 70,000 bpd from last month’s forecast and now expects global demand to rise by 5.95 million bpd in 2021.

Daily Forecast

The strong demand forecasts are likely to overcome the gradual increases in output by OPEC and its allies. So prices are likely to remain underpinned over the near-term.

Additionally, a weaker U.S. Dollar should continue to be supportive for prices since it tends to increase foreign demand for the dollar-denominated commodity.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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