Oil Price Fundamental Daily Forecast – EIA Gasoline Inventory Build Raises Concerns About Fuel Demand

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Thursday after reversing earlier weakness. The early strength is a bit of a surprise since the news is negative shortly before the regular session opening.

The buying appears to be a little cautious with traders struggling to hold onto gains in the wake of a build in U.S. gasoline inventories and a bleak outlook for fuel demand due to a resurgence in coronavirus cases.

At 11:36 GMT, December WTI crude oil is trading $40.38, up $0.35 or +0.87%. This is up from an intraday low of $39.71. December Brent crude oil is at $42.12, up $0.39 or +0.93%. Its intraday low is $41.47.

US Energy Information Administration Weekly Inventories Report

U.S. crude oil and distillate inventories fell last week, while gasoline stocks rose in another weak showing for fuel demand, the Energy Information Administration (EIA) said on Wednesday.

Crude inventories fell by 1 million barrels in the week to October 16 to 488.10 million barrels, in line with analysts’ expectations in a Reuters poll.

Distillate stockpiles, which include diesel and heating oil, fell by 3.8 million barrels to 160.7 million barrels, more than double the forecast for a 1.7 million-barrel drop, the EIA data showed.

U.S. gasoline stocks rose by 1.9 million barrels in the week, the EIA said, compared with expectations for a 1.8 million-barrel drop.

Refinery runs and crude production both fell sharply, however, which analysts attributed to ongoing disruptions from Hurricane Delta. Production of crude fell sharply last week to 9.9 million barrels per day from 10.5 million bpd, which was in part due to offshore facilities shutting for part of the week due to the hurricane.

Bearish Factors Move to Forefront

New daily COVID-19 infections hitting records in several U.S. states and in Europe, new lockdowns and China’s clamp-down on outbound travel to help stem the spread of the disease, all bode ill for fuel demand.

Additionally, worsening the outlook, hopes that U.S. lawmakers would reach an agreement with the White House on an economic stimulus package dimmed late on Wednesday after President Donald Trump accused Democrats of holding up a compromise deal.

Finally, Libyan oil exports are quickly accelerating into October as loading restarts following the easing of a blockade by eastern forces.

Short-Term Outlook

Coronavirus-led demand issues and the threat of a supply glut should be enough to cap gains over the short-term although we could see a short-covering spike to the upside if Washington policymakers reach an agreement on fiscal stimulus.

The daily chart indicates the possibility of a rangebound trade with $40.63 to $41.50 providing resistance and $39.42 to $38.83 providing the support.