Oil Price Fundamental Daily Forecast – EIA Report Should Set Tone

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Wednesday, helped by a private report that showed a bigger-than-expected draw down in U.S. stockpiles, an easing of tensions in the Middle East and worries over a potential gasoline supply disruption on the East Coast. Optimistic comments from Treasury Secretary Steven Mnuchin are also helping to underpin prices.

At 11:55 GMT, August WTI crude oil is at $58.88, up $1.04 or +1.78% and September Brent crude oil is at $65.00, up $0.72 or +1.12%.

American Petroleum Institute Weekly Inventories Report

Oil prices received a boost late Tuesday when the API reported a large crude oil inventory draw of 7.55 million barrels for the week-ending June 20. This was much larger than the estimated 2.891-million drawdown.

According to the API data, the net build is still 26.69 million barrels for the 26-week reporting period so far this year.

The API also reported a 3.17 million-barrel draw in gasoline inventories for the week-ending June 20. Analysts were looking for a build of 217,000 barrels for the week. Distillate inventories rose by 160,000 barrels for the week.

Middle East Tensions Ease

There were no new developments in the on-going clash between the United States and Iran. Both sides exchanged words with President Trump threatening to obliterate parts of Iran if it attacked “anything American”. Tehran condemned a fresh round of U.S. sanctions as “mentally retarded”.

Major East Coast Refinery to Close

Philadelphia Energy Solutions (PES) is expected to seek to permanently shut its oil refinery in the city after a massive fire caused substantial damage to the complex. PES has already declared force majeure on gasoline supplies following the fire. U.S. gasoline futures hit their highest level since the end of May on supply concerns.

Mnuchin Optimistic About Trade Deal; Could Ease Demand Concerns

Treasury Secretary Steven Mnuchin told CNBC on Wednesday the U.S. and China were close to a trade deal, and he’s optimistic that progress can be made during weekend talks between Donald Trump and China’s Xi Jinping at the G-20 Summit in Osaka, Japan.

“We were about 90% of the way there [with a deal] and I think there’s a path to complete this,” he told CNBC’s Hadley Gamble in Manama, Bahrain.

Most traders don’t expect a deal to be reached this week-end, but the two economic powerhouses could announce the resumption of trade talks. Furthermore, Trump could back-off from his threat of additional tariffs. Both events would be good for crude oil because they would ease concerns over demand.

Energy Information Administration Weekly Inventories Report

The EIA report on crude oil inventories is due to be released on Wednesday at 14:30 GMT. Traders are looking for a 2.7 million barrel draw down. A bigger than expected draw should drive prices sharply higher.