Oil Price Fundamental Daily Forecast – Early Buying Tentative; EIA Gasoline Data Could Set the Tone

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Wednesday despite a potentially bearish private industry report showing an unexpected build in weekly inventories across the board and warnings from two major agencies about future demand. The markets may be firm, but the volatility is low ahead of the release of the official government inventories report at 15:30 GMT.

At 10:30 GMT, February WTI crude oil is trading $47.94, up $0.16 or +0.33% and February Brent crude oil is at $50.92, up $0.16 or +0.32%.

Although gains have been limited so far on Wednesday, traders are showing little reaction to a surprise gain in crude oil inventories in the United States as investors continued to worry about demand for fuel being squeezed amid tighter lockdowns in Europe to counter the coronavirus pandemic.

Earlier in the week, OPEC warned of lower demand in early 2021. The International Energy Agency (IEA) also revised down its estimates for oil demand this year by 50,000 barrels per day (bpd) and for next year by 170,000 bpd, citing scarce jet fuel use as fewer people travel by air.

Still, progress on vaccine rollouts continued on Tuesday after Moderna Inc’s COVID-19 vaccine appeared set for U.S. regulatory authorization this week.

U.S. congressional leaders also reported substantial progress on Tuesday after two meetings of top Democrats and Republicans to end a months-long standoff on coronavirus relief and finalize a funding bill to avert a government shutdown.

American Petroleum Institute Weekly Inventories Report

The API reported on late Tuesday a build in crude oil inventories of 1.973 million barrels for the week-ending December 11. Analysts had predicted an inventory draw of 1.937 million barrels for the week.

The API also reported a small build in gasoline inventories of 828,000 barrels of gasoline for the week-ending December 11 – compared to the previous week’s 6.442-millon-barrel build. Analysts had expected a 1.614-million-barrel build for the week.

Distillate inventories were up by 4.762 million barrels for the week, compared to last week’s 2.316-million barrel increase, while Cushing inventories fell this week by 165,000 barrels.

Daily Forecast

The markets aren’t bullish per se early in the session, but they’re not bearish either although the limited follow-through to the upside after touching a nine-month high suggests the buying is a little tentative ahead of the U.S. Energy Information Administration’s (EIA) report at 15:30 GMT.

The hedge funds are long so prices aren’t likely to break sharply unless they start to sell. One trigger for the start of a sell-off could be a big build in U.S. stockpiles, particularly gasoline.

“On the demand side, the biggest near-term downside risk to oil demand expectations is the United States, predominately due to persistent weakness in U.S. gasoline demand, given the current trajectory of COVID-19 in the country,” analysts at FGE wrote in a note.

Today’s EIA report is expected to show a draw of 1.9 million barrels, according to a Reuters poll.