API reports deficit while the market awaits EIA report

WTI is faced with heavy selling pressure as the producers continue to hedge, while speculators scale back positions fearing an increased output from the United States. WTI is currently trading at $51.2 per barrel.

Key factors at play in crude oil market –

• While Saudi Arabia, Qatar, Oman indicated compliance to the deal, exports from Iraq are set to rise through February. Watch the following countries’ production to measure the deal’s success: Saudi Arabia, Libya, Nigeria, Russia, Iran, and Iraq.
• US production rose by 8.428 million barrels in last July to 8.77 million barrels per day last week. Payroll report showed that jobs were added in the oil and gas sector for the first time in more than 2 years. In November jobs increased by 3,300 after a loss of more than 150,000 in last two years.
• Oil contango has shrunk signaling success to the deal. A shift to backwardation is necessary to improve oil price in the spot market.
• API reported a buildup of 1.5 million barrels of crude oil for the first time in eight weeks.

Today’s inventory report from US Energy Information Administration (EIA) will be released at 15:30 GMT. Trade idea –

• We expect the WTI to extend gains towards $59 per barrel, and then towards $67 per barrel. However, a decline towards $46 per barrel in the short term can’t be ruled out. We don’t suspect the oil price to break below $42 stop loss area for the long call.