Oil Price Fundamental Daily Forecast – EIA Report Raises Concerns About Oversupply on Top of Demand Worries

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower early Friday while continuing to consolidate inside Tuesday’s wide range. Despite attempts to form a support base, the markets are now in a position to finish lower for the seventh day out of eight and for the week.

At 07:43 GMT, December WTI crude oil is trading $37.86, down $0.25 or -0.66% and December Brent crude oil is at $40.35, down $0.28 or -0.69%.

The first round of selling this week was triggered by an unexpected price cut in Asia by Saudi Arabia. The second round of selling pressure is being fueled by a surprise rise in U.S. stockpiles as the coronavirus pandemic continues to erode demand for fuels.

US Energy Information Administration Weekly Inventories Report

Crude oil finished lower on Thursday after U.S. government data revealed a weekly rise in U.S. crude inventories, on the heels of six consecutive weeks of declines, raising expectations of an oversupplied market as uncertainty continues to surround the outlook for demand.

The Energy Information Administration (EIA) reported that U.S. crude inventories rose by 2 million barrels for the week-ended September 4 – the first weekly increase in seven weeks. Traders were looking for a 3.1 million barrel decline.

Total U.S. crude inventories, excluding those in the Strategic Petroleum Reserve stood at 500.4 million barrels, about 14% above the five-year average for this time of year.

The EIA also reported a big drop of 1.1 million barrels per day in crude refinery runs for last week, leading to the first domestic crude-stock build in weeks. This was the result of refinery damage from Hurricane Laura.

Gasoline supply, meanwhile, fell by 3 million barrels, while distillate stockpiles declined by 1.7 million barrels. An S&P Global Platts survey had shown expectations for a supply decline of 2.5 million barrels for gasoline, but distillates were expected to rise by 300,000 barrels.

Additionally, the EIA data also showed crude stocks at the Cushing, Oklahoma, storage hub edged up by about 1.9 million barrels for the week, while total domestic oil production climbed by 300,000 barrels to 10 million barrels per day.

Daily Forecast

Unless there is a wave of short-covering or profit-taking ahead of the weekend, sellers should continue to dominate the trade on Friday. Earlier in the week, it was demand worries driving the market lower, after the release of the EIA data, we can add oversupply concerns to the growing list of bearish factors weighing on prices.