Crude Oil Prices Forecast: EIA Data Loom Large

May 4, 2018 — 9:45 AM EDT

Oil looks to be ending the week pretty much where it started, up just 0.4% as of Thursday's closing price. The market shrugged off this week's massive increase in U.S. crude oil inventories. Data from the EIA showed a surprise increase of over 6.2 million barrels against analysts' forecasts for a gain of just 739,000 barrels.

Traders' attention remains focused on the outcome of President Trump's pending decision on whether to withdraw the U.S. from the internationally agreed 2015 Iran nuclear accord. Doing so could significantly decrease Iranian crude oil exports and tighten global supplies. The President is due to decide by May 12. The uncertainty has put a bid in oil that is keeping its price elevated despite more immediate concerns about rising inventories.

EIA Short-term Energy Outlook Due

On May 8, the market will receive the Energy Information Administration's (EIA) monthly short-term energy outlook, where the focus is expected to be on estimates of U.S. crude oil production. Last month's report said that the EIA projects U.S. crude production to average 10.7 million barrels per day in 2018, which would make it the highest annual average U.S. crude oil production level, surpassing the current record of 9.6 million barrels per day set in 1970.

In last month's report, the EIA also forecast that 2019 crude oil production would again increase, averaging 11.4 million barrels per day. Traders and analysts will be reviewing this month's report for any revisions to these production expectations. Higher estimates could put downward pressure on oil prices, especially if President Trump postpones a decision on the status of the Iran nuclear accord.

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Earnings Season Rolls On

In addition to the EIA report on May 8, investors will also get an update on the 1Q18 financial performance of Occidental Petroleum Corporation (OXY). Occidental is the next of several major U.S. oil companies to report first quarter financial results. Analysts expect revenue to increase by 23.2% compared with the same quarter last year, according to data from FactSet and Thomson Reuters. Net income should increase to $529 million from $117 million in 1Q17 on the back of rising oil prices and production levels.

Last month, Occidental said that its 2018 capital budget is $3.9 billion, and its estimated production growth for the year will range between 8% and12%, with 40% annual growth in Permian Resources. Occidental's share price is up 4.3% this year, which exceeds the S&P 500 energy index by 2.37%.

The Bottom Line

Oil remains range bound for the third week in a row. Traders are caught between uncertainty about President Trump's pending decision to renew economic sanctions on Iran that could take barrels off the market on one hand and growing U.S. production and efficiency gains that are boosting supplies on the other. Once the President decides what to do about Iran, the market is sure to break out definitively from its current tight trading range in one direction or the other.

Disclaimer: Gary Ashton is an oil and gas financial consultant who writes for Investopedia. The observations he makes are his own and are not intended as investment or trading advice. Gary does not own shares of OXY.