Oil Price Fundamental Daily Forecast – EIA Inventories Report on Tap after Surprise API Build Weighs on Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Wednesday, but off their intraday lows. Several factors may be encouraging investors to book profits after the recent five day run-up. These factors include doubts over demand amid rising worldwide COVID-19 cases, unexpected gasoline shortages in some regions, a stronger U.S. Dollar and an unexpected jump in crude oil and product inventories.

At 08:59 GMT, December WTI crude oil futures are trading $74.39, down $0.51 or -0.68% and December Brent crude oil futures are at $77.88, down $0.47 or -0.60%.

Asia’s Crude Oil Imports Set for Soft September

Asia’s crude oil imports are set to decline for a second month in September as the world’s top-importing region continues to lag the demand recovery in other parts of the world.

Seaborne imports in Asia are expected to decline to 31.71 million barrels per day (bpd) in September from August’s 32.34 million bpd, according to data compiled by commodity consultants Kpler

Physical traders in Asia are reporting no shortage of available cargoes and refiners are reluctant to buy more crude, given demand for refined fuels in many countries remains subdued amid lockdowns and travel restrictions as part of efforts to combat the ongoing coronavirus pandemic.

Fuel Pumps Run Dry in UK, Europe

Fuel supply problems began at the end of last week when oil companies in the UK reported difficulty transporting petrol and diesel from refineries to filling stations.

An air of chaos has gripped Britain, the world’s fifth-largest economy, in recent weeks as a shortage of truck drivers strained supply chains and a spike in European wholesale natural gas prices tipped energy companies into bankruptcy.

Industry groups said the worst of the fuel shortages seemed to be in London, the southeast and other English cities. Fights have broken out at some forecourts as drivers jostled for fuel and pictures on social media showed some people filling up old water bottles with fuel.

Rising US Dollar Threatens Demand for Dollar-Denominated Crude Oil

The U.S. Dollar rose to its highest level in more than five weeks amid rising U.S. bond yields. This could make dollar-denominated crude oil less attractive to foreign buyers.

U.S. Treasury yields have surged since the end of last week, after the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon as November and hinted that interest rate hikes may follow in 2022.

American Petroleum Institute Weekly Inventories Report

The API on Tuesday reported a surprise build in crude oil inventories of 4.127 million barrels for the week ending September 24. Analyst expectations were for a loss of 2.333 million barrels for the week.

The API also reported a build in gasoline inventories of 3.555 million barrels for the same week. Distillate stocks saw an increase in inventories this week of 2.483 million barrels for the week.

Daily Forecast

Today’s weakness comes ahead of the Energy Information Administration (EIA) report due to be released at 14:30 GMT. Analysts in a Reuters poll expect data from the EIA to show a fall in crude stockpiles. An unexpected build in EIA inventories could send crude oil prices sharply lower.

Traders are also shifting their focus to OPEC+ ahead of its upcoming production meeting. Most expect OPEC and its allies to decide to keep supplies tight.

“While the supply backdrop has not changed much, oil prices hitting USD80/bbl would see pressure for OPEC+ nations to increase their production quota,” ANZ Research said in a note.