Oil Price Fundamental Daily Forecast – API Report Shows Surprise Crude Build, Larger Gasoline Draw

U.S. West Texas Intermediate and international-benchmark Brent crude oil settled higher as investors used the weaker U.S. Dollar as an excuse to book profits in the dollar-denominated market after the steep four-day sell-off.

July WTI Crude Oil settled at $68.21, up $1.48 or +2.17% and August Brent crude oil finished the session at $77.72, up $2.23 or +2.87%.

Traders may have also reacted to reports that Russia’s central bank expressed caution on plans to boost oil supply. Traders also initially shrugged off an unexpected build in U.S. crude stockpiles.

Last Friday, sources told Reuters that Saudi Arabia and Russia are discussing raising oil output from OPEC and other major non-OPEC producers by around 1 million barrels per day. On Wednesday, however, the Russian central bank said falling oil prices would pose a risk to the country’s financial sector.

In other news, India’s Reliance Industries Ltd, owner of the world’s biggest refining complex, plans to halt oil imports from Iran, two sources familiar with the matter said.

Additionally, in Brazil, the FUP oil workers union said workers had joined the call for a nationwide strike on at least 20 oil rigs in the lucrative Campos basin and other areas of the country. Ongoing unrest could threaten demand for fuels in Brazil, which U.S. data showed was the No. 8 energy consumer in 2016.

Forecast

Crude oil is trading slightly lower early Thursday. The price action could be a delayed reaction to a potentially bearish inventories report from the American Petroleum Institute (API) or position-squaring ahead of today’s U.S. Energy Information Administration’s weekly inventories report.

At 0728 GMT, July WTI crude oil is trading $68.03, down $0.18 or -0.26% and August Brent crude oil is at $77.30, down $0.20 or -0.26%.

Late Wednesday, the API reported that U.S. crude supplies rose by 1 million barrels in the week-ended May 25. Traders were expecting a 600,000 barrel drop in crude supplies.

The API data also showed a fall of 1.7 million barrels in gasoline supplies. The forecast was for a decline of 1.5 million barrels of gasoline. Distillates climbed by 1.5 million barrels. Traders were looking for a draw of about 1.1 million barrels for distillates.

It looks like the hedge funds had it right. While they were taking profits in crude oil, they were buying gasoline futures.

Later today at 1430 GMT, the U.S. Energy Information Administration’s inventories report is expected to show a draw of about 400,000. This may change based on the API data.

Finally, the comment from Russia’s central bank about the country’s plan to boost supply came as a surprise, but it may be just enough to create the uncertainty needed to fuel a short-covering rally.