Oil Price Fundamental Daily Forecast – Gasoline Shortage Fears Underpinning Crude Oil Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching lower in an early two-sided trade on Wednesday as traders continue to assess the potential impact of Hurricane Laura on offshore output in the Gulf of Mexico. Also helping to underpin prices is optimism over China-U.S. trade talks.

Further price support came from data from the American Petroleum Institute (API) showing U.S. crude oil stockpiles fell more than expected last week.

At 11:14 GMT, October WTI crude oil futures are trading $43.14, down $0.21 or -0.48%. December Brent crude oil is at $46.55, down $0.11 or -0.24%.

Gains were capped by renewed concerns over the surge in COVID-19 cases, which continues to squeeze global demand. Reports coming out of Europe and Asia of patients being re-infected with coronavirus, are raising concerns about future immunity.

Hurricane Laura Forecast to Intensify to a Catastrophic Category 4

Hurricane Laura is forecast to rapidly power up into a “catastrophic” Category 4 hurricane, even stronger than previously expected, as it churns toward Texas and Louisiana, gathering wind and water that swirls over much of the Gulf of Mexico.

“We are expecting widespread power outages, trees down. Homes and businesses will be damaged,” said Donald Jones, a National Weather Service meteorologist in Lake Charles, Louisiana, which is near the bullseye of Laura’s forecast track.

A Category 4 hurricane will do catastrophic damage:  “Power outages will last weeks to possibly months. Most of the area will be uninhabitable for weeks or months,” the weather service says.

US Gulf Producers Preparing for Major Hurricane Strike

The U.S. energy industry on Tuesday was preparing for a major hurricane strike. Producers evacuated 310 offshore facilities and shut 1.56 million barrels per day of crude output, 84% of Gulf of Mexico’s offshore production – near the 90% outage that Hurricane Katrina brought 15 years ago.

American Petroleum Institute Weekly Storage Report

The API reported late Tuesday a draw in crude oil inventories of 4.524 million barrels for the week-ending August 21. Analysts had predicted an inventory draw of 3.694-million barrels.

The API also reported a large draw in gasoline inventories too, of 6.392 million barrels of gasoline for the week-ending August 21. Analysts had expected a much smaller 1.533-million-barrel draw for the week.

Distillate inventories were up by 2.259 million barrels for the week, compared to last week’s 964,000-barrel draw, while Cushing inventory fell by 646,000.

Daily Forecast

At 14:30 GMT, the U.S. Energy Information Administration (EIA) will release its weekly inventories numbers. Traders are looking for a draw of 3.4 million barrels. However, the focus for traders will be on Hurricane Laura and the accompanying production disruption.

The biggest worry for traders appears to be a gasoline shortage, which could worsen over time if the damage from the hurricane causes a prolonged disruption at refineries that last weeks or months. It looks like the hedge funds guessed right because they had been betting on the products to rise faster than crude oil.