Oil Price Fundamental Daily Forecast – EIA On-Tap but Traders Would Like to See COVID-19 Aid Package Approved

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading flat-to-higher on Wednesday despite another reported drawdown in inventories by the American Petroleum Institute (API).

The price action suggests traders are continuing to take a cautionary approach to good news because of lingering concerns over the pace of the economic recovery, a resurgence in coronavirus cases and the lack of progress in the COVID-19 aid talks. Some of the major players have also taken to the sidelines ahead of today’s official government inventories report.

At 12:22 GMT, September WTI crude oil is trading $41.68, up $0.07 or +0.17% and December Brent crude oil is at $45.55, up $0.18 or +0.40%.

American Petroleum Institute Weekly inventories Report

The API reported on Tuesday a draw in crude oil inventories of 4.401 million barrels for the week-ending August 7. Analysts had estimated a modest inventory draw of 2.875-million barrels.

The API also reported a draw of 1.310 million barrels of gasoline for the week-ending August 7, compared to last week’s 1.748-million-barrel draw. This week’s draw compares to analyst expectations for a 674,000-barrel draw for the week.

Distillate inventories were down by 2.949 million barrels for the week, compared to last week’s 3.824-million barrel build, while Cushing inventory was the only build this week, gaining 1.073 million barrels.

Uncertainty Over Coronavirus-Aid Package Capping Gains

Traders are worried that the lack of progress in Washington over the next COVID-19 aid package will have a negative impact on demand.

Investors are juggling uncertainty over a second coronavirus stimulus bill. Over the weekend, President Trump signed four executive orders to extend some coronavirus aid. Meanwhile, Treasury Secretary Steven Mnuchin said Monday the White House is open to resuming coronavirus aid talks with Democrats and putting more relief money on the table to reach a compromise.

Investors are hoping Republicans and Democrats will resolve their differences and agree on another relief program to support about 30 million unemployed Americans, as the battle with the virus outbreak was far from over with the U.S. cases surpassing 5 million last week.

Meanwhile, Senate Majority Leader Mitch McConnell urged Democratic leaders and the White House to restart coronavirus aid talks. Discussions ground to a halt on Friday. Congress has not been able to reach a COVID-19 aid agreement even as the expiration of financial lifelines leaves millions scrambling to cover bills.

A deal would be bullish for crude oil because it will lead to increased demand expectations.

Daily Forecast

Traders showed little response to today’s U.S. consumer inflation reports. The Consumer Price Index rose 0.6%, beating the 0.3% forecast while matching the previously reported 0.6% gain.

Core CPI also rose 0.6%, beating both the estimate and last month’s number.

The U.S. Energy Information Administration will release its weekly inventories report at 14:30 GMT. It is expected to show a crude oil draw down of 3.4 million barrels.

Based on the reaction to the larger than expected draw in the API report, this number is going to have to blow away the estimate in order to get a substantially bullish response. Once again the gasoline and distillate numbers will be closing watched.

Without a formal financial aid package, it’s hard to get bullish crude oil, but traders so far haven’t given up hope. Furthermore, any positive news about a vaccine could also be supportive.

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