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Oil Price Fundamental Daily Forecast – EIA Gasoline Inventory Will Dictate Today’s Tone

By:
James Hyerczyk
Published: Aug 16, 2017, 02:13 UTC

U.S. West Texas Intermediate and internationally-favored Brent crude oil spent most of the session lower, but managed to eke out a higher close. The

Crude Oil

U.S. West Texas Intermediate and internationally-favored Brent crude oil spent most of the session lower, but managed to eke out a higher close. The markets were weighed down and the upside limited because of the stronger U.S. Dollar and signs of weaker demand in China.

October WTI crude oil settled at $47.84, up $0.11 or +0.23% and November Brent crude oil closed at $50.83, up $0.20 or +0.40%.

Crude Oil
Daily October West Texas Intermediate Crude Oil

According to official data from China, oil refineries operated in July at their slowest daily rates since September. The steep drop came as a surprise to investors, raising concerns over the state of Chinese demand and level of domestic stockpiles.

The sharp rise in the U.S. Dollar also raised questions about future foreign demand for dollar-denominated crude oil.

Technically, the lower-low, higher-close chart pattern suggests the buying may be greater-than-the selling at current price levels. This was no surprise since the market was down 10 days from its most recent top.

The market also hit a value area defined as $47.46 to $47.26. This may have encouraged short-sellers to take profits and new buyers to step in.

Brent Crude
Daily November Brent Crude Oil

Forecast

Despite being under pressure most of the session, both futures contracts mounted dramatic turnarounds into the close. There has been no follow-through to the upside, however, during Wednesday’s early session. This could be because of general nervousness ahead of today’s U.S. Energy Information Administration’s weekly inventories report.

The catalyst behind yesterday’s late session rally was a bullish weekly inventories report from the American Petroleum Institute (API). The report showed a major draw of 9.2 million barrels in the week-ending August 11. This was the biggest draw since September 2016. Analysts were looking for a draw of only 3.6 million barrels.

Once again the upside was limited by a surprise build in gasoline inventories. They rose by 301,000 according to the API. Traders had priced in a 1.5 million barrel draw.

Distillate inventories were down 2.1 million barrels, while inventories at the Cushing, Oklahoma futures market hub increased by 1.7 million barrels.

On Wednesday at 1430 GMT, the EIA will release its inventories data. Traders are expecting a 3.0 million barrel draw.

A bigger than expected draw should support higher prices on Wednesday especially since the WTI futures contract successfully tested a key value area on Tuesday. Gains could be limited, however, if gasoline inventories continue to grow. A stronger dollar could also cap gains.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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