Oil Price Fundamental Daily Forecast – Flat Ahead of OPEC, Non-OPEC Production Discussions in Russia

U.S. West Texas Intermediate and international-favorite Brent crude oil are trading flat-to-mixed as investors square positions ahead of the week-end and a key meeting of major oil producing nations next week in St. Petersburg Russia.

At 0625 GMT, September WTI crude oil is trading $46.89, down $0.03 or -0.06% and October Brent crude oil is trading $49.53, up $0.01 or +0.02%.

Prices were driven higher early in the session on Thursday on the back of a bullish government report from the previous day, but gradually gave back gains throughout the session as investors gave up on the long side due to technical chart factors and fundamental concerns.

On Wednesday, the U.S. Energy Information Administration reported that U.S. commercial crude inventories fell by 4.7 million barrels in the week-ending July 14. This was better than the 3.2 million barrel draw forecast.

Gasoline stocks also drew down more than expected, dropping 4.4 million barrels, and distillates posted a surprise draw of 2.1 million barrels. Analysts were looking for a 1.2 million barrel build.

Crude oil prices rallied on the news despite the EIA reporting increased U.S. daily production of 9.43 million barrels per day (bpd).

Forecast

Prices could trade sideways-to-lower today as investors square positions ahead of a key meeting between six ministers from OPEC and Non-OPEC producers, including Saudi Arabia and Russia, in St. Petersburg, Russia, on July 24. They are scheduled to discuss compliance with production cuts and progress toward market rebalancing.

Russia appears ready to continue working with OPEC to help rebalance oil markets. It seems to like the flexible approach by OPEC’s leader Saudi Arabia to accommodate rising output from Nigeria and Libya.

“We welcome the constructive approach and flexibility of our partners in addressing the challenges which arise on the path towards a balanced market,” a source, who is close to the Russian delegation negotiating with OPEC, said.

“Russian itself is fully committed to the spirit of the initiative aimed at stabilizing global crude markets and will continue working with other countries to achieve this goal.”

Earlier in the week, the Saudi’s said they hoped to accommodate the rise in production from Libya and Nigeria through supply adjustments elsewhere but emphasized a need to work together with other producers.

Traders are also expected to response to today’s U.S. rig count from Baker Hughes. A decline in the number of rigs should undermine the market. Another increase should lead to a sell-off.