Oil Price Fundamental Daily Forecast – Gulf Coast Storm Threatening U.S. Refineries

U.S. West Texas Intermediate and international-benchmark crude oil rose over 1 percent on Wednesday after a favorable U.S. government weekly inventories report. The actual crude oil number came in as expected, but a drawdown in gasoline stocks set a bullish tone in the market.

October WTI crude oil settled at $48.41, up $0.58 or +1.21% and November Brent crude oil closed at $52.24, up $0.66 or +1.28%.

According to the U.S. Energy Information Administration (EIA), oil inventories fell by 3.3 million barrels to 463.2 million barrels during the week-ending August 18. Gasoline stocks fell by 1.2 million barrels, compared with expectations in a Reuters poll for a 643,000-barrel drop.

 Forecast

The ongoing drawdowns in U.S. commercial crude storage levels are a strong sign of a gradually tightening market. However, another rise in output is limiting gains. While prices remain supported by the strong drawdowns, buyers remain cautious because U.S. oil output continues to push higher.

According to the EIA, U.S. oil production hit 9.53 million barrels per day (bpd) last week, the highest since July 2015 and up over 13 percent from their most recent low in mid-2016.

The support and upside momentum generated by the EIA report could hold prices steady to higher on Thursday. However, there is a potentially bullish development. Traders are watching a storm approaching Gulf Coast refineries and oil rigs, which could cause potential output disruptions.

According to CNBC, Tropical Depression Harvey is expected to again become a tropical storm by Thursday, as it heads towards the Gulf Coast, and could become a Category 1 hurricane by Friday.

The storm’s track, while still unpredictable, appears to be heading towards the Houston area and western Louisiana, where it could dump two feet or more of rain.

Gasoline prices are feeling the earliest impact, jumping higher late Wednesday/early Thursday. Traders expect more upward pressure on gasoline futures as the storm gets closer to Texas.