Oil Price Fundamental Daily Forecast – Bullish Move Sparked by Gasoline Demand Running into Headwinds

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower early Thursday after failing to follow-through to the upside following yesterday’s nearly one-percent gains and technical closing price reversal bottoms. The early price action suggests that yesterday’s move may have been fueled by short-covering rather than aggressive counter-trend buying in reaction to a U.S. government inventories report.

At 0739 GMT, September WTI crude oil futures are trading $67.41, down $0.34 or -0.51% and September Brent crude oil futures are at $72.47, down $0.43 or -0.59%.

On Wednesday, the U.S. Energy Information Administration (EIA) reported that crude oil inventories increased 5.8 million barrels in the week-ending July 13, compared with analysts’ expectations for a decrease of 3.6 million barrels.

U.S. crude oil production last week hit 11 million barrels per day (bpd) for the first time in the nation’s history, the EIA said. Net U.S. crude imports rose last week to 2.2 million bpd to about 9 million bpd.

Gasoline stocks fell by 3.2 million barrels, compared to analysts’ expectations for a drop of 44,000 barrels. Distillate stockpiles, which include diesel and heating oil, fell by 371,000 barrels, versus expectations for an 873,000-barrel increase, the EIA data showed.

Forecast

Yesterday’s rally was fueled by the bigger-than-expected drop in gasoline futures. However, gains were likely limited by the larger-than-expected build in crude inventories and more importantly, the jump in U.S. production to a record 11 million bpd.

Today’s early price action indicates that traders are struggling with signs of strong gasoline demand in the United States at a time when oil producers are putting more crude on the market. This likely means that the bullish move sparked by the gasoline data is unlikely to last.

Additionally, President Trump is targeting high gasoline prices and is trying hard to get them lowered. Russia and Saudi Arabia are helping Trump’s cause by increasing their supply so it will be a challenge for bullish traders to overcome resistance on the basis of increased gasoline demand.

As far as September WTI crude oil is concerned, a sustained move over $68.01 will indicate the short-covering is getting stronger, while a move under $66.81 will signal lower prices to follow. As for September Brent crude oil, look for a counter-trend bullish tone to develop on a sustained move over $72.94 and for the bearish tone to continue on a sustained move under $71.20.