By Barani Krishnan
Investing.com - It’s back to the drawing board of weekly U.S. inventory data for oil traders as a sudden disappearance in Middle East risk premiums thrusts the market towards actual barrel counts.
West Texas Intermediate, the benchmark for U.S. crude, settled up 15 cents, or 0.3%, at $58.23 per barrel. It was the first rebound in six sessions for WTI, which struck a five-week low of $57.91 in the previous session.
Brent, the global benchmark for crude, rose 44 cents, or 0.7%, to $64.64 by 3:45 PM ET (20:45 GMT).
WTI has lost about 4% since the start of 2020, while Brent has lost around 2%.
Crude prices rocketed in the first week of the year as a U.S. drone strike killed top Iranian general Qassem Soleimani in Baghdad on Jan. 3, sparking fears of an all-out U.S.-Iran war.
Iran responded by firing missiles at U.S. airbases in Iraq. But those rockets didn’t kill any U.S. servicemen and President Donald Trump decided to stand down further escalations with Tehran. That dramatically eased tensions in the Middle East and crude prices as well.
Oil traders are likely to focus on upcoming weekly U.S. inventory data as “the risk premium in the market is zero,” said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, N.C.
The market is awaiting crude, gasoline and distillate stockpiles numbers for the week ended Jan. 10, due from the U.S. Energy Information Administration on Wednesday.
Ahead of the EIA’s release, trade group American Petroleum Institute will issue its own weekly inventory snapshot that the market usually uses as guidance for the government data. The API numbers are due at 4:30 PM ET Tuesday.
In its last weekly report, the EIA said U.S. crude stockpiles rose by 1.2 million barrels for the week ended Jan. 3, versus market expectations for a decline of 3.6 million barrels. Gasoline inventories soared by 9.1 million barrels, compared with expectations for a rise of 2.7 million barrels. Distillate stockpiles climbed by 5.3 million barrels, versus forecasts for a build of 3.9 million barrels.
For the forthcoming EIA report, analysts are expecting a crude inventory decline of 750,000 barrels. Gasoline is expected to build by 4.0 million barrels while distillates are expected to grow by 650,000.
Separately, in its Short Term Energy Outlook for January, the EIA said U.S. crude production was expected to hit a record high production of 13.3 million barrels per day in this year and 13.7 million in 2021.
As for crude prices, the EIA forecast that Brent will average $64.83 for 2020 and $67.53 for 2021.
For WTI, the EIA expected U.S. crude to average about $5.50 per barrel below Brent through 2021, compared with the average 2019 discount of $7.35.