Oil Price Fundamental Daily Forecast – EIA Providing Demand Support, IEA Warns of Supply Issues

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading marginally higher on Thursday, shortly before the regular session opening. The markets inched higher earlier in the session, following through to the upside after a government report triggered a strong surge in prices.

At 0903 GMT, October WTI crude oil futures are trading $69.62, up $0.11 or +0.14% and November Brent crude oil is at $77.68, up $0.22 or +0.28%.

In a nutshell, crude oil prices are being supported on Thursday by expected supply issues with Iran and Venezuela, and strong momentum created by Wednesday U.S. government report which showed a bigger than expected draw in inventories.

According to reports, Iran’s August crude oil exports will likely drop to just over 2 million bpd, versus a peak of 3.1 million bpd in April, as importers cave to U.S. pressures to cut purchase orders.

Additionally, the International Energy Agency (EIA) continued to warn of a tightening market late in the fourth quarter, due to a combination of supply concerns, and strong demand especially in Asia.

“Definitely there are some worries that oil markets can tighten towards the end of this year,” the IEA’s chief Fatih Birol told Reuters on Wednesday.

On Wednesday, the Energy Information Administration said U.S. crude stocks fell more than forecast the week-ending August 24. The report offset some of the weakness generated by the previous day’s potentially bearish American Petroleum Institute’s weekly inventories data.

The EIA said crude inventories fell by 2.6 million barrels in the week to August 24, compared with analysts’ expectations for a decrease of 686,000 barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 58,000 barrels.

Refinery crude runs fell by 326,000 barrels per day and refinery utilization rates fell by 1.8 percentage points.

Gasoline stocks fell by 1.6 million barrels, compared with analysts’ expectations for a 370,000-barrel gain. Distillate stockpiles, which include diesel and heating oil, fell by 837,000 barrels, versus expectations for a 1.6 million-barrel increase, the EIA data showed.

Additionally, net U.S. crude imports fell last week by 657,000 bpd.

Forecast

With WTI and Brent crude clearing key resistance areas, and the potentially bullish supply/demand situation, it seems the only factor standing in the way of both futures contracts challenging their summer tops is the potential for profit-taking.

For WTI crude, support is $68.46 and the upside targets are $71.05 and $71.29. Brent crude has support at $75.69 and targets at $78.63 and $78.77.