Oil Price Fundamental Daily Forecast – Early Direction Hinges Upon PPI Data, Later the API Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Tuesday, but in a limited range. The lack of fresh fundamental developments may be causing investor uncertainty, but this is likely to clear up with the release of the report on U.S. Producer Inflation at 12:30 GMT and the American Petroleum Institute’s weekly inventories report at 20:30 GMT.

At 11:08 GMT, July WTI crude oil is trading $53.69, up $0.43 or +0.81% and August Brent crude oil is at $62.37, up $0.08 or +0.13%.

The PPI report will affect the demand side of the supply/demand equation. The API report will affect supply.

Core PPI is expected to come in at 0.2%, up from the previously reported 0.1%. PPI is expected to come in at 0.1%, down from 0.2%. Lower-than-expected readings will indicate a weakening economy. This could be an early indication of lower future demand, which could be bearish for crude oil. Prices could stabilize or move higher if the numbers come in better than expected.

Traders are looking for the API report to show a 500,000 barrel drawdown for the week-ending June 7. Last week, the report showed a surprise build in crude inventory of 3.545 million barrels for the week-ending May 31, coming in over analyst expectations of 208,000 barrels drawdown.

As of last week’s report released on June 4, the net build is 30.20 million barrels for the 23-week reporting period so far this year.

In other news, WTI and Brent continued to be underpinned by expectations OPEC and its allies will keep withholding supply.

CNBC is reporting that Russia said on Monday it might support an extension of OPEC-led supply cuts that have been in place since January. OPEC and its allies are due to meet in late June or early July to decide whether to extend the pact. Russia’s comments on Monday, and remarks last week from Saudi Arabia, are increasing hopes the deal will be renewed.

Gains continue to be limited by worries over demand due to the impact of a slowing global economy caused by the lingering U.S.-China trade impasse.

Daily Forecast

Look for strength early in the session if the PPI data comes in higher than expected. The gains could be extended late in the session if the API reports a larger-than-expected drawdown.

In the worst case scenario that could produce another round of weakness, PPI would come in lower and API inventories higher.