Oil Price Fundamental Daily Forecast – Lack of Follow-Through to Upside Raises Concerns About Demand

We’re still looking for a choppy, two-sided trade over the near-term unless there is a major breakthrough in U.S.-China trade relations. At 12:30 GMT, the U.S. will release a report on Preliminary GDP. It is expected to come in at 2.0%, down from 2.1%. We could see a reaction in the market if there is an extreme miss.
James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed early Thursday as investors continue to search for direction, while reacting to nearly every piece of news that crosses the wire.

Today’s two-sided price action is being fueled by negative comments on the strength of the economy from Thursday and spike in U.S. stock prices early Friday. Traders can’t seem to make up their minds about a direction, which leads me to believe low pre-holiday volume is behind the price swings and rapid shifts in direction.

At 08:10 GMT, October WTI crude oil is trading $55.91, up $0.14 or +0.27% and December Brent crude oil is at $59.12, down $0.11 or -0.19%.

Markets Under Pressure Early

WTI and Brent futures were under pressure early in the session on Thursday after San Francisco Federal Reserve President Mary Daly sounded a note of concern about the strength of the U.S. economy.

Daly said she is in a “watch and see” mode as she assesses the need for another U.S. interest-rate cut for an economy that has “strong” momentum but faces headwinds from uncertainty and a global growth slowdown.

“I’m in a watch-and-see position right now,” Daly told reporters after a speech in Wellington, New Zealand, adding that over the next few weeks she’ll be focused on what business contacts and economic data say about consumer confidence and consumer spending as well as inflation.

U.S. Energy Information Administration Weekly Inventories Report

Crude oil prices spiked higher on Wednesday after the EIA reported a surprisingly strong inventory drawdown. The news actually confirmed a similar number in the American Petroleum Institute’s (API) weekly inventories report late Tuesday afternoon.

According to the EIA, crude oil inventory fell 10 million barrels during the week-ending August 23. Analysts were looking for a 2.1 million barrel draw.

U.S. gasoline stocks fell by 2.1 million barrels versus a forecast of a 388,000-barrel drop. Distillate inventories fell by 2.5 million barrels for the week, while inventories at Cushing fell by 2.4 million barrels.

Daily Forecast

We’re still looking for a choppy, two-sided trade over the near-term unless there is a major breakthrough in U.S.-China trade relations.

All the huge decline in U.S. inventories means is that the OPEC-led supply cuts are helping to deplete U.S. stockpiles. Some speculators read the drawdown to mean the economy was strengthening, which helped offset recession fears, at least temporarily, on Wednesday.

At 12:30 GMT, the U.S. will release a report on Preliminary GDP. It is expected to come in at 2.0%, down from 2.1%. We could see a reaction in the market if there is an extreme miss.

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