Oil Price Fundamental Daily Forecast – Lack of Clarity from OPEC+ Caps Gains, API Draw Underpinning Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching lower early Thursday as traders try to recover from a second session of heavy selling pressure.

Long investors are aggressively trimming positions due to the lack of clarity from OPEC+ regarding future policy and worries that supply may rise after the collapse of this week’s talks among major producers. The biggest fear for bullish investors is that the current output agreement may be abandoned.

At 05:53 GMT, September WTI crude oil futures are trading $71.34, down $0.16 or -0.22% and September Brent crude oil is at $73.38, down $0.05 or -0.07%.

Crude oil futures are down over 5% since Monday’s close after talks between OPEC+ fell apart when de facto leader Saudi Arabia refused demands from the United Arab Emirates (UAE) to raise its output under the group’s supply cut agreement.

In other news, prices are being supported by a larger-than-expected decline in crude oil inventories according to a private industry survey.

API Report Shows Seventh Straight Inventory Draw Down

The American Petroleum Institute (API) late Wednesday reported a draw in crude oil inventories of 7.983-million barrels for the week-ending July 2. Traders were looking for a decline of 6.2 million barrels, based on a survey by S&P Global Platts.

The API also reported a build in gasoline inventories of 2.736-million barrels for the week-ending July 2. Analysts had expected a draw of 0.886 million barrels.

Distillate stocks saw an increase in inventories this week of 1.086 million barrels for the week, compared to last week’s 428,000-barrel increase.

Daily Forecast

We’re still looking for heightened volatility ahead of Thursday’s U.S. Energy Information Administration (EIA) weekly inventories report, due to be released at 14:30 GMT. The government’s inventories data was pushed back a day following the U.S. Fourth of July holiday on Monday. Traders are estimating a crude oil draw of 4.0 million barrels.

The lack of clarity from OPEC+ is expected to continue keep buyers on the sidelines. This is a typical move in the crude oil market. When investors see uncertainty, they tend to liquidate long positions and step to the sidelines.

According to reports, Russia is trying to mediate between Saudi Arabia and the UAE to help strike a deal to raise oil output, three OPEC+ sources said on Wednesday. According to the Wall Street Journal, the UAE has a clear desire to boost production and market share. This news weighed on prices on Wednesday.