Oil Price Fundamental Daily Forecast – Crude, Gasoline Inventories May Have Reached the Bottom

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday amid renewed concerns over demand recovery as more restrictions and lockdowns are imposed to curb the spread of coronavirus infections.

This week’s American Petroleum Institute (API) and Energy Information Administration inventories showed drawdowns in crude oil, but fuels were mixed. Economic reports were also strong, but that doesn’t seem to matter to investors, who were pricing in future events.

At 18:28 GMT, October WTI crude oil is trading $67.40, down $0.96 or -1.40% and October Brent crude oil is at $71.09, down $1.16 or -1.61%.

Most of this week’s gains have been attributed to thin market conditions and a major outage in Mexico, where a fire on Sunday on an offshore platform filled at least five workers and knocked out a bit over 400,000 barrels per day (bpd) of production.

Prices topped out when the situation on the Mexican offshore platform stabilized. Pemex has so far recovered 71,000 bpd of production and in the next few hours expects to add an additional 110,000 bpd.

Supply Situation Revisited

The American Petroleum Institute (API) on Tuesday reported a draw in crude oil inventories of 1.622 million barrels for the week ending August 20, bringing the total 2021 crude draw so far to more than 58 million barrels, using API data. Analysts were looking for a draw of about 2.367 million barrels for the week.

The API also reported a draw in gasoline inventories of 985,000 barrels for the week-ending August 20, compared to the previous week’s 1.1979-million-barrel draw.

Distillate stocks saw a decrease in inventories this week of 245,000 barrels for the week, compared to last week’s 502,000-barrel increase.

The U.S. Energy Information Administration (EIA) on Wednesday reported U.S. crude inventories fell last week for a third consecutive week while overall fuel demand increased the most since March 2020.

Crude oil stocks dropped by 3 million barrels in the week to August 20, a little above analysts’ expectations in a Reuters poll for a 2.7 million-barrel drop. At 432.6 million barrels, crude stocks were at their lowest since January 2020.

U.S. gasoline stocks fell by 2.2 million barrels in the week to 225.92 million barrels, the EIA said, exceeding expectations for a 1.6 million-barrel drop. U.S. East Coast gasoline stocks fell last week to their lowest since March 2018.

Distillate stockpiles, which include diesel and heating oil, rose by 0.6 million barrels to 138.46 million barrels, versus expectations for a 0.3 million-barrel drop, the EIA data showed.

Short-Term Outlook

On paper, the crude oil and gasoline inventories look bullish, but that data is already stale. The coronavirus is still spreading and the summer driving season in the U.S. is rapidly coming to a close.

While U.S. consumers appear to be ignoring the spread of the Delta variant, it seems likely that demand in the United States is near the peak, which will act as a cap on crude prices.

Seasonal tendencies and demand destruction from the spread of the coronavirus could be enough to fuel another round of selling pressure over the near-term.