Oil Price Fundamental Daily Forecast – EIA Forecast Calls for 1.2 Million Barrel Draw

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower after getting hit by a one-two punch late Tuesday afternoon. After rallying early in the session on Tuesday, prices began to retreat after President Trump brought a halt to fiscal stimulus negotiations. Prices took a further hit later in the session following a private report that showed U.S. crude stockpiles posted their first build in four weeks.

At 09:26 GMT, December WTI crude oil is trading $40.02, down $0.91 or -2.22% and December Brent crude oil is at $41.79, down $0.86 or -2.02%.

Trump Ends Stimulus Negotiations

President Trump ended talks on Tuesday with Democrats on an economic aid package for the United States, the world’s biggest oil consumer, with the U.S. presidential election only weeks away.

Trump said he told negotiators to call off coronavirus stimulus talks until after the 2020 election. At stake is an ongoing effort to send trillions of dollars of relief to Americans in the midst of the COVID-19 pandemic. Some of this money was expected to be used by consumer for gasoline purchases.

Oil Prices Plunge on Larger than Expected Crude Build

The American Petroleum Institute (API) reported late Tuesday a build in crude oil inventories of 951,000 barrels for the week-ending October 2. Analysts were predicting an inventory build of 400,000 barrels.

The API reported a draw in gasoline inventories of 867,000 barrels of gasoline for the week ending October 2 – compared to the previous week’s 1.623-million-barrel build. Analysts had expected a 900,000-barrel draw for the week.

Distillate inventories were down by 1.033 million barrels for the week, compared to last week’s 3.424-million-barrel draw, while Cushing inventories rose by 749,000 barrels.

Oil production in the United States remained unchanged in the last week, still down from a high of 13.1 bpd on March 13. U.S. oil production currently sits at 10.7 million bpd, according to the Energy Information Administration – 2.4 million bpd under those March highs.

Daily Forecast

Oil prices are finding some support on Wednesday after President Trump clarified his stance on additional stimulus, saying he’s willing to pass several independent coronavirus relief measures – including a new round of stimulus checks.

“If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now. Are you listening Nancy?” Trump tweeted.

“The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business. Both of these will be fully paid for with used funds from the Cares Act. Have this money I will sign now!” the president wrote in another tweet.

Losses are also being limited by an escalating strike in Norway. The Lederne labor union said on Tuesday it will expand its ongoing oil strike from October 10 unless a wage deal can be reached in the meantime. Six offshore oil and gas fields shut down on Monday because of the strike, cutting the country’s output capacity by 8%.

Finally, at 14:30 GMT, the U.S. Energy Information Administration (EIA) will issue its weekly inventories report. Traders are looking for drawdown of 1.2 million crude oil barrels. Sellers could retest their lows if the number comes in higher than expected. Once again, the gasoline and distillate numbers will be watched closely.