Oil Price Fundamental Daily Forecast – Bullish EIA Report Could Ease Concerns Over Storage Constraints

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher early Wednesday ahead of the regular session opening and the release of the weekly government inventories report.

Traders are saying predictions that the inventories report may show a smaller than expected build than previously forecast is encouraging short-covering just days after the industry was worried about limited storage capacity.

At 09:19 GMT, June WTI crude oil futures are trading $14.16, up $1.82 or +14.75% and June Brent crude oil is at $21.48, up $1.00 or +4.89%.

U.S. oil prices gained on Wednesday, trimming some of this week’s losses, after U.S. stockpiles rose less than expected and on expectations demand will improve as some European countries and U.S. cities moved to ease coronavirus lockdowns.

American Petroleum Institute Weekly Inventories Report

The API estimated on Tuesday another large crude oil inventory build of 9.978 million barrels to 510 million barrels for the week-ending April 24 as the demand destruction continues and storage space nears its upper limits. Traders were looking for a build of 10.619 million barrels.

The API also reported a draw of 1.108 million barrels of gasoline for the week-ending April 24, after last week’s 3.435-million-barrel build. This week’s build compares to analyst expectations for a 2.527-million-barrel build for the week.

Distillate inventories were up by 5.462 million barrels for the week, compared to last week’s 7.639-barrel build, while Cushing inventories saw a gain of 2.486 million barrels.

US Firms Cutting Production

Traders are saying production cuts of almost 10 million bpd by OPEC and its allies or about 10% of global production, due to take effect from May 1, are not going to have that much of an impact on prices without the United States curbing its own output.

While storage is rapidly filling up, production cuts by U.S. shale producers, estimated by consultants Rystad Energy at 300,000 barrels per day (bpd) for May and June, should help slow flows into tanks.

Additionally, regulators in the U.S. state of Texas, the country’s biggest oil producer, will hold a vote on May 5 on whether to enact output curtailments. Officials in the states of North Dakota and Oklahoma are also examining ways to legally allow output cuts.

Daily Forecast

Crude oil prices could get a boost later today at 14:30 GMT with the release of the U.S. Energy Information Administration (EIA) weekly inventories report. Traders are estimating an 11.2 million barrel build. A lower number should trigger a short-covering rally.

Some optimistic traders are also starting to price in a jump in demand with many countries preparing to remove COVID restrictions.

Additionally, there are signs that the crude oil ETF, known by the symbol USO, may have also completed its liquidation of the June futures contract. This may be enough to fuel some profit-taking and short-covering.