Oil Price Fundamental Daily Forecast – COVID-Related Demand Concerns Weighing on Prices Ahead of EIA Data

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching lower after posting a steep decline the previous session. Concerns over rising cases of the coronavirus Delta-variant encouraged weak longs to liquidate positions placed throughout July on increased bets demand would outstrip supply into the end of the year.

At 05:59 GMT, September WTI crude oil is trading $70.34, down $0.22 or -0.31% and October Brent crude oil is at $72.38, down $0.03 or -0.04%.

Private industry inventories data is providing some support for prices overnight, but the major concern at this time is not too much about supply, but rather demand.

American Petroleum Institute Weekly Inventories Report

The API on Tuesday reported a draw in crude oil inventories of 879,000 barrels for the week ending July 30, bringing the total 2021 crude draw so far to nearly 55 million barrels, using API data.

In the previous week, the API reported a draw in oil inventories of 4.728 million barrels largely in line with the anticipated draw that week of 3.433 million barrels.

The API also reported a draw in gasoline inventories of 5.751 million barrels for the week-ending July 30, compared to the previous week’s 6.226-million-barrel draw.

Distillate stocks saw a decrease in inventories this week of 717,000 barrels for the week, on top of last week’s 1.882-million-barrel decrease.

Cushing inventories rose this week by 659,000 barrels, compared to last week’s 126,000-barrel decrease.

Delta Fears Rising in US and China

The US and China, the world’s two biggest oil consumers, are grappling with rapidly spreading outbreaks of the highly contagious delta variant that analysts fear will limit fuel demand at a time when it traditionally rises in both countries, Reuters said.

In China, the spread of the variant from the coast to inland cities has prompted authorities to impose strict measures to bring the outbreak under control, Reuters reported. All 12 million Wuhan residents will be tested for COVID-19. China is now experiencing the widest-spread outbreak since the virus first emerged, even managing to infiltrate areas that have been virus-free for months.

In Other Supply-Related News

OPEC+ began increasing production by 400,000 barrels per day on August 1. Meanwhile, simmering geopolitical tensions in the Gulf may offset some of the supply/demand concerns.

On Tuesday, three maritime security sources claimed Iranian-backed forces seized an oil product tanker off the coast of the United Arab Emirates, though Iran denied the reports.

Daily Forecast

On Wednesday, traders will get a chance to react to the latest inventories data from the Energy Information Administration (EIA), due to be released at 14:30 GMT. Traders are looking for a draw of 3.2 million barrels of crude oil.

Technically, both WTI and Brent crude oil attracted buyers on yesterday’s pullback into short-term value zones. For September WTI crude oil, this zone is $69.62 to $68.53. For October Brent crude oil, the key support area is $71.26 to $70.22.

The price action suggests traders are still bullish on crude oil, but only if they can get a good price. No one wants to overpay when there is so much uncertainty about demand.