Crude Gains Ground on Surprise Inventory Deficit

Crude oil has shown some life in the North American session, after the EIA crude inventory report posted a decline for the first time in six weeks.
Kenny Fisher
Hintergrundbild, gestapelte Kunststoffrohre im Gegenlicht

Crude oil has posted small gains on Wednesday. In the North American session, U.S. West Texas Intermediate crude oil futures are trading at $54.89, up $0.63, or 1.13% on the day. Brent crude futures are trading at $60.40, up $0.52 or 0.90%.

Brent to Stay Close to $60?

On Tuesday, Goldman Sachs said that it expected oil prices (Brent crude) to remain around the $60 level in 2020, barring any “meaningful” energy shocks. The report said that Brent futures were caught between “worsening growth expectations and rising Middle East tensions”. Notably, Goldman Sachs has lowered its demand for crude in 2019 and 2020. The forecast for 2019 was lowered to 950 thousand barrels per day, down from an earlier forecast of 1.25 million. The forecast for 2020 has been lowered to 1.25 million, down from 1.45 million.

Investors Eye Trade Talks

With China gripped in an economic slowdown, the U.S-China trade talks could prove critical to boosting world growth, and with it the demand for crude oil. China’s GDP dipped to 6.0% in the third quarter, and the downward trend is expected to continue if the impasse between the world’s two largest economies continues. The sides are focusing on reaching a limited trade agreement (“phase 1”), and a breakthrough in the talks could send oil prices higher.

EIA Crude Inventories Drops Unexpectedly

Crude prices have been under significant downward pressure, courtesy of crude inventories, which continue to post surpluses. The Energy Information Administration (EIA) has recorded five straight surpluses and the markets had expected another surplus on Wednesday. However, this time there was a deficit of 1.7 million barrels. Crude has responded with gains in the North American session, and is up over 1% on the day.

 

WTIUSD 1-Day Chart

 

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