Oil Price Fundamental Daily Forecast – EIA Expected to Report 2.5 Million Barrel Draw Down

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher shortly before the regular session opening, bolstered by another larger-than-expected draw in U.S. crude stockpiles and increased tensions in the Middle East. Investor expectations that the Fed will lower borrowing costs for the first time in over 10-years is also helping to underpin prices.

At 10:21 GMT, September WTI crude oil futures are trading $58.38, up $0.33 or +0.58% and October Brent crude oil is at $65.04, up $0.41 or +0.61%.

American Petroleum Institute Weekly Inventories Report

The API reported a crude oil inventory draw of 6.024 million barrels for the week-ending July 25. This was much larger than analyst expectations of a much smaller, 1.818-million barrel draw. Furthermore, after the new data, the net result is a draw for the year at -4.83 million barrels for the 31-week reporting period so far, according to the API data.

The API report also showed a 3.135 million barrel draw in gasoline inventories for the week-ending July 25. Traders were looking for a 1.449 million barrel draw. Distillate inventories fell by 890,000 barrels for the week, while inventories at Cushing fell by 1.4494 million barrels.

Iran, Russia Planning Joint Naval Drill in Mid East Hot Spot

Russia and Iran are planning a joint naval exercise scheduled within the next year, commander of Iran’s Navy, Rear Admiral Hossein Khanzadi announced Monday, according to state media. According to a report, the exercise will take place in March 2020 in the Indian Ocean and may extend to the Strait of Hormuz.

“A coordination meeting will be held between the two sides in this regard,” he said while on a three day visit to Russia. “When we speak of the Indian Ocean, perhaps the most important part of which is the northern region where it’s linked to the Sea of Oman, the Strait of Hormuz and also the Persian Gulf,” Khanzadi said from Saint Petersburg.

Daily Forecast

At 14:30 GMT, the U.S. Energy Information Administration will release its weekly inventories report. It is expected to show a 2.5 million barrel draw down. A larger-than-expected draw will be supportive.

At 18:00 GMT, the U.S. Federal Reserve is widely expected to announce a 25-basis point rate cut. A more aggressive 50-basis point rate hike will weaken the U.S. Dollar and drive up demand for dollar-denominated crude oil. Furthermore, it will send a message to oil traders that the Fed is serious about continuing the current 10-year economic expansion.

Traders will be paying close attention to any guidance the Fed offers, which may include additional rate cuts in September and December.