Oil Price Fundamental Daily Forecast – EIA Report Could Surprise after API Data Showed Unexpected Draw

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed lower on Wednesday after giving back earlier gains. The early weakness has put the market in a position to close lower for a fourth straight session.

Although concerns over a global recession and lower demand have dominated the bearish trade this week, bullish traders are still counting on the combination of OPEC+ production cuts and the EU embargo of Russian energy products to provide support.

At 09:02 GMT, December WTI crude oil futures are trading $82.21, up $0.14 or +0.17% and December Brent crude oil is at $89.95, down $0.08 or -0.09%. On Tuesday, the United States Oil Fund ETF (USO) settled at $68.72, down $1.41 or -2.01%.

Increased Supply from SPR Release Capping Oil Gains

On Tuesday, WTI fell by 3.1% and Brent by 1.7% to their lowest levels in two weeks on reports of U.S. President Joe Biden’s plans to release more barrels from the Strategic Petroleum Reserve (SPR).

This is probably Biden’s last chance to drive down crude oil and gasoline prices before the November elections, but it’s probably only a short-term solution since the upcoming EU embargo is expected to tighten supply. Lower output from OPEC+ is also expected to increase supply.

In December, the administration plans to sell 15 million barrels of oil from its reserves, the final tranche of the 180 million barrels release announced earlier this year, a senior U.S. official said.

More Demand May Be Coming

Besides the upcoming Russian embargo and the OPEC+ production cuts, unexpected news from China also helped underpin prices or at least slow down the selling.

Reuters said prices were supported on signs of resurgent demand. Private mega-refiner Zhejiang Petrochemical Corp (ZPC) won additional crude oil import quota for 2022 of 10 million tonnes and state-run ChemChina received a further quota of 4.28 million tonnes. That is equal to about 104 million barrels.

Short-Term Outlook

Today’s mixed trade should clear up later today with the release of the weekly U.S. Energy Information Administration’s (EIA) inventories report. It is supposed to show that U.S. crude oil stockpiles rose by 2.5 million barrels, down from last week’s 9.9 million barrel build.

However, there may be a surprise after the American Petroleum Institute (API) reported late Tuesday that crude oil inventories had actually fallen by 1.3 million barrels. Additionally, gasoline inventories declined by about 2.2 million barrels while distillate stockpiles dropped by 1.1 million.

The EIA data will be released at 14:30 GMT.

Essentially, we’re looking a possible near-term weakness as the market works out the SPR releases, but after that conditions could turn bullish with the EU ban on Russian crude looming in early December.