Oil Price Fundamental Daily Forecast – EIA Draw, Trade Deal Optimism Could Trigger Price Surge

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher as investors continue to bet that a trade deal between the United States and China will ease concerns over future demand growth.

Traders are also expressing optimism that OPEC and its allies will extend their program to reduce production into at least June 2020. Both events are offsetting an oil industry report that showed a bigger-than-expected build in weekly crude inventories.

At 12:16 GMT, January WTI crude oil is at $58.58, up $0.17 or +0.29%. January Brent crude oil is trading $64.50, up $0.23 or +0.36%.

Trade Deal Optimism Persists

The optimists are hanging on to the positive comments from Beijing and Washington. China’s Ministry of Commerce said Tuesday that negotiators from Washington and Beijing held another phone call to discuss how to “resolve core issues.” Trump followed up by saying that the U.S. and China are in the “final throes” of reaching a trade deal.

Bullish Traders Hoping for Production Cut Extensions

Traders continue to expect OPEC and its allies, including Russia to agree to reduce output to support prices at their December 5-6 meeting. The broader producer group is widely expected to extend its 1.2 million-barrel-per-day supply cut to the middle of 2020.

Many traders feel that the group would have probably increased their output cuts had the U.S. and China not made progress in their trade talks. Analysts at J.P. Morgan believe the cuts may be extended until the end of 2020.

American Petroleum Institute Weekly Inventories Report

Late Tuesday, the API reported a crude oil inventory build of 3.639 million barrels for the week-ending November 21. Traders were looking for a build of about 420,000 million barrels.

According to Oilprice.com, “After today’s inventory move, the net draw has swung into build territory for the year, standing at 830,000 barrels for the 48-week reporting period so far, using API data.”

The API also reported a build of 4.378 million barrels of gasoline for the week-ending November 21. Analysts were looking for a smaller build in gasoline inventories of 1.222-million barrels for the week.

Distillate inventories saw a draw of 665,000 barrels for the week, while Cushing inventories fell by 516,000 barrels.

Daily Forecast

At 15:30 GMT, the U.S. Energy Information Administration (EIA) is scheduled to release its own weekly inventories report. Traders are predicting a 500,000-barrel drawdown.

“If the numbers are similar to the API, this would be the fifth straight week of stock builds, and would not be the most constructive reading for WTI as we head into the Thanksgiving holiday,” ING analyst Warren Patterson said in a note.