Oil Price Fundamental Daily Forecast – Gains Limited by Renewed Concerns Over Demand

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading nearly flat after finishing sharply higher the previous session on the back of a surprise drop in U.S. crude stockpiles. Gains are being limited, however, on Thursday by the re-emergence of demand worries as crews return to U.S. Gulf rigs.

At 10:24 GMT, December WTI crude oil futures are trading $40.71, down $0.01 or -0.02% and December Brent crude oil futures are at $42.79, unchanged.

US Crude Stockpiles Drop Unexpectedly, Diesel Builds

U.S. crude oil stockpiles unexpectedly fell last week despite rising production, while distillate inventories were up once again, the U.S. Energy Information Administration said on Wednesday.

Crude inventories fell to their lowest since April at 496 million barrels in the week to September 11, sliding 4.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.3 million-barrel rise.

Production rose for a second consecutive week, jumping 900,000 barrels per day of crude last week, to 10.9 million bpd, the data showed.

Distillate stockpiles, which include diesel and heating oil, rose by 3.5 million barrels last week to 179.3 million barrels, versus expectations for a 600,000-barrel rise, the EIA data showed.

U.S. gasoline stocks fell 400,000 barrels to 231.5 million barrels, the EIA said, compared with analysts’ expectations for a 160,000-barrel drop.

Crude oil stocks at the Cushing, Oklahoma, delivery hub for WTI fell by 74,000 barrels, the EIA said.

Refinery runs rose by 709,000 bpd in the last week, the EIA said. Refinery utilization rates rose by 4 percentage points, in the week.

Net U.S. crude imports fell last week by 66,000 bpd, the EIA said.

Oil Gains Capped as Demand Worries Re-Emerge, Crews Return to U.S. Gulf Rigs

WTI and Brent crude oil prices are being capped on Thursday as U.S. producers in the Gulf of Mexico prepared to resume output following Hurricane Sally, and on concerns that the coronavirus pandemic was showing few signs of slowing.

Daily Forecast

As producers prepare to resume production in the Gulf of Mexico, WTI and Brent crude oil prices are being capped and beginning to retreat from yesterday’s price spike.

Meanwhile, others had a different opinion on the EIA report. “It was a bearish report, particularly as we continue to stare down demand issues,” said John Kilduff, Partner at Again Capital in New York. “The dropoff in diesel demand is disturbing because truck demand had been a bright spot.”

With U.S. energy company crews starting to return to offshore oil platforms in the Gulf of Mexico after Hurricane Sally halted operations for five days, it’s just a matter of days before output increases by nearly 500,000 barrels per day, another bearish factor.

Additionally, an OPEC+ technical panel warned that a rise in coronavirus cases in some countries may curb oil demand despite signs of economic recovery and initial indications of a decline in oil stocks, according to an internal document seen by Reuters.