Oil Price Fundamental Daily Forecast – Concerns Over Gasoline Demand Pressure Crude Prices

U.S. West Texas Intermediate and international benchmark Brent crude oil futures are down sharply late in the session on Wednesday after the latest government inventories report signaled there is going to be a lot of crude oil out there, which should put near-term pressure on prices.

At 17:49 GMT, October WTI crude oil is trading $41.70, down $1.06 or -2.48% and December Brent crude oil is at $45.05, down $0.95 or -2.07%.

U.S. crude oil and fuel stockpiles fell sharply last week as Hurricane Laura shut offshore production and refining facilities, the Energy Information Administration (EIA) said on Wednesday.

U.S. Energy Information Administration Weekly Inventories Report

Crude inventories fell by 9.4 million barrels in the week to August 28 to 498.4 million barrels, according to the EIA data, compared to analysts’ expectations’ in a Reuters poll for a 1.9 million-barrel drop.

That drop was driven by a record fall in production, which dropped by 1.1 million barrels per day to 9.7 million bpd, its lowest since January 2018, as most U.S. offshore facilities were shut as a precaution ahead of Laura.

Laura made landfall early last Thursday, lashing the coast with high winds and causing numerous refineries to shut or reduce output.

Imports at the U.S. Gulf fell by 501,000 bpd to a record low of 781,000 bpd. Net U.S. crude imports fell 655,000 bpd, the EIA said.

Gasoline stocks fell 4.3 million barrels in the week, the EIA said, compared with expectations for a 3 million-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell by 1.7 million barrels in the week, versus expectations for a 1.4 million-barrel drop, the EIA data showed.

Refinery crude runs fell by 844,000 bpd and refinery utilization rates fell by 5.3 percentage points to 76.7% of total capacity, the EIA said.

Product supplied, a proxy for demand, was lower as well, which may restrain refiners from ramping up production.

Short-Term Outlook

We’re looking for short-term selling pressure as traders shrug off the bullish crude inventory data and throw their focus to the drop in gasoline demand, which indicates the economic recovery from the pandemic is likely to be slower than expected.

For a look at all of today’s economic events, check out our economic calendar.