Oil Price Fundamental Daily Forecast – Mild Boost from Rise in China Crude Imports

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading marginally higher on Thursday after posting a potentially bearish technical reversal top the previous session. So far the chart pattern hasn’t been confirmed by follow-through selling, but the pattern hasn’t been negated yet either. This inside move suggests investor indecision and impending volatility.

At 09:12 GMT, June WTI crude oil futures are trading $24.25, up $0.26 or +1.12% and July Brent crude oil is at $29.99, up $0.27 or +0.91%.

China Crude Imports Rise

Crude oil was pressured early on Thursday as the industry grappled with the growing global supply glut and the coronavirus-led demand destruction, but turned higher after data from China showed crude imports rose last month. Imports climbed to 10.42 million barrels per day (bpd) in April from 9.68 million bpd in March, according to Reuters calculations based on customs data from the first four months of 2020.

However, overall exports from China also rose against expectations of a sharp drop, though a big drop in total imports suggested any recovery is some way off as economies around the world fall into recession, meaning demand for fuels will likely remain subdued at best.

U.S. Energy Information Administration Weekly Inventories Report

The EIA reported Wednesday that U.S. crude inventories rose 4.6 million barrels for the week-ended May 1. The data, which excludes changes in the Strategic Petroleum Reserve, marked a 15^th consecutive weekly rise, but was smaller than the average increase of 7.1 million barrels forecast by analysts polled by S&P Global Platts.

Crude stocks at the Cushing, Oklahoma futures hub rose about 2 million barrels for the week. Domestic crude production totaled 11.9 million barrels a day, down 200,000 bpd, the EIA data showed.

Gasoline supply fell by 3.2 million barrels and distillate stockpiles rose by 9.5 million barrels, the EIA said. The S&P Global Platts survey had shown expectations for a supply decline of 400,000 barrels for gasoline, while distillate stocks were forecast at 3.5 million barrels higher.

Daily Forecast

The markets have been rallying for two weeks as investors have keyed in on signs of a slowdown in production and the easing of coronavirus-related restrictions across the globe. Back to back smaller than expected crude oil inventory builds have been supportive, but the rise in distillate stockpiles offset that news.

We’re seeing a lot of short-covering, but traders have been reluctant to go long given the bearish fundamentals. This may change if prices pullback into a value area. Furthermore, traders are not going to gain confidence in playing the long side until they start to see that the attempts to reopen the economy are proving to be successful.