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Oil Price Fundamental Daily Forecast – EIA on Tap as Traders Continue to Fret Over Demand Woes

By:
James Hyerczyk
Updated: Sep 2, 2020, 12:12 UTC

Traders expect the EIA report to show a 1-million barrel build, but this could change because of the API numbers. 

WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed on Wednesday shortly before the regular session opening. Prices are being underpinned by a surprise drop in U.S. crude oil inventories, according to the American Petroleum Institute (API), but capped by worries that surging coronavirus cases will lead to a decline in demand.

At 11:29 GMT, September WTI crude oil futures are trading $41.45, up $0.41 or +1.00% and September Brent crude oil futures are at $43.71, up $0.49 or +1.13%.

Later today, traders will get the opportunity to react to the latest weekly inventories data from the U.S. Energy Information Administration (EIA).

American Petroleum Institute Weekly Inventories Report

The API reported on Tuesday a draw in crude oil inventories of 6.829 million barrels for the week-ending July 24. Analysts were looking for an inventory build of 357,000 barrels.

The API also reported a build of 1.083 million barrels of gasoline for the week-ending July 24- compared to last week’s 2.019-million-barrel draw. This week’s build compares to analyst expectations for a 733,000-barrel draw for the week.

Distillate inventories were up by 187,000 barrels for the week, compared to last week’s 1.357-million barrel draw, while Cushing inventories saw an increase of 1.144 million barrels.

South Korean Refiners Post Record First-Half Losses on Plunge in Oil Price, Demand

Two refiners in South Korea, the world’s fifth largest crude oil importer, posted their biggest losses ever in the first half when oil prices slumped as the COVID-19 ravaged fuel demand.

“We saw the worst oil price in the first half of this year hit by the pandemic and we had to purposely lower our capacity because the pandemic sapped oil demand,” and SK Innovation official told Reuters, asking not to be named.

Daily Forecast

With the raging COVID-19 pandemic keeping alive worries over falling fuel demand, the new concern for traders is oversupply.

“It is becoming more apparent that the demand recovery many were expecting in oil over the second half of the year just too optimistic,” ING Research said.

“A resurgence in COVID-19 cases, along with continued travel restrictions has meant that this demand recovery has stalled, or at least slowed,” ING said.

We still looking for a rangebound trade until traders get some guidance from the Fed later today and Congress moves forward with its new fiscal stimulus plan.

The markets could weaken if the Fed emphasizes the risk to the economy if the coronavirus pandemic worsens. Additionally, a delay in passing the fiscal stimulus package will also be bearish.

Finally, traders expect the EIA report to show a 1-million barrel build, but this could change because of the API numbers.

For a look at all of today’s economic events, check out our economic calendar.

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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