Oil Price Fundamental Daily Forecast – API Report on Tap; Big Gasoline Draw Could Spike Prices Higher

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are up nearly 2% late Tuesday as the markets tested more than two year highs, boosted by expectations demand will recover rapidly in the second half of 2021.

Traders now await the release of the American Petroleum Institute’s (API) weekly inventories report at 20:30 GMT. Analysts polled by Reuters expect U.S. crude stocks to have fallen for a fourth week in a row, dropping by about 3 million barrels last week. The U.S. government will release its official supply data at 14:30 GMT on Wednesday.

At 19:12 GMT, September WTI crude oil is trading $71.23, up $1.23 or +1.76% and September Brent crude oil is at $73.43, up $1.14 or +1.58%.

Bullish Chatter Providing Support

“With supply growth lagging demand growth in the near term, faster falling oil inventories are supporting oil prices,” UBS analyst Giovanni Staunovo said.

The head of trading house Vitol sees oil prices moving between $70-$80 a barrel this year as the Organization of the Petroleum Exporting Countries and allied producers (OPEC+) are predicted to maintain supply discipline.

“We have had those stock draws for a couple months, the market is heading in the right direction,” Russell Hardy told the FT Commodities Global Summit.

Trafigura Chief Executive Jeremy Weir told the same event there was a good chance prices could reach $100 a barrel because of falling reserves before the world reaches peak oil demand.

Finally, “The decision by OPEC+ to be overly cautious in returning supply to the market, whether this is true caution or they are intentionally stoking oil prices higher, has been a main tenant in seeing $73 per barrel Brent,” said Louise Dickson, oil markets analyst at Rystad Energy.

Short-Term Outlook

The gasoline inventory number will be the focus in today’s API report and tomorrow’s Energy Information Administration (EIA). Traders have been waiting since the start of the U.S. driving season on May 31 for a bullish number.

Last week, the API reported a build in gasoline inventories of 2.405 million barrels for the week ending June 4 – on top of the previous week’s 2.51-million-barrel build. Analysts had expected a much smaller build of 698,000-barrel for the week.

Additionally, according to EIA, the growth in fuel inventories indicates weak U.S. driving season fuel demand. Fuel stocks were up sharply, with product supplied falling to 17.7 million barrels per day versus 19.1 million the week before. Implied gasoline demand fell to 8.48 million bpd in the week to June 4, down from 9.15 million bpd from the week before, but up from 7.9 million bpd a year ago, EIA data showed.

Crude oil prices could spike sharply higher late in the session on Tuesday if the API gasoline inventory numbers are bullish.