Oil Price Fundamental Daily Forecast – Pressured by Bearish API Crude Oil Build; EIA Inventories Report on Tap

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on relatively low volume on Wednesday ahead of the weekly government inventories report and Federal Reserve monetary policy announcements and policymaker projections.

Prices are also being pressured after a report showed a rise in crude inventories in the United States, reviving concerns about oversupply and weak demand due to the coronavirus crisis.

At 09:15 GMT, July WTI crude oil is trading $37.94, down $1.00 or -2.57% and August Brent crude oil is at $40.29, down $0.89 or -2.16%.

API Shocks Traders With Huge Crude Oil Build

The American Petroleum Institute (API) reported late Tuesday that crude oil inventories rose 8.42 million barrels during the week-ending June 5. Analysts had predicted a small inventory draw of 1.738 million barrels.

The API also reported a draw of 2.913 million barrels of gasoline for the week-ending June 5, compared to last week’s 1.706-barrel build. Analysts were looking for a 71,000-barrel build for the week.

Distillate inventories were up by 4.271 million barrels for the week, compared to last week’s 5.917-million-barrel build, while Cushing inventories saw a draw of 2.28 million barrels.

Libya’s National Oil Corporation Declares Force Majeure on Its Largest Oil Field

Libya’s National Oil Corporation has declared force majeure on exports from its largest oil field Tuesday, after a militia group shut it down just days after it resumed production following a six-month blockade.

“The armed group, which came from Sebha, stormed the Sharara oil field and pulled their guns on civilian unarmed workers, coercing them to stop production at the field at dawn,” the state oil company said in a statement.

If there weren’t so many concerns about oversupply and extremely low demand, this news probably would’ve spiked prices higher. Instead, there was only a mildly bullish reaction.

Daily Forecast

The Fed announcements could pressure prices if policymakers paint a gloomy picture of the economy. This would only add to demand concerns. Weaker equity markets could drive down demand for risky assets, which could also pressure oil prices.

Due to the excessive supply, which Goldman Sachs estimates to be about 1 billion barrels, and the fear of a second wave of coronavirus cases, which would just destroy demand, we can build a case for a near-term correction.

Additionally, outlooks from other energy forecasters are mixed. Ratings agency Moody’s cut its oil outlook to a more bearish one, forecasting the commodity to average $8 per barrel lower this year than its March 2020 outlook.

Later today at 14:30 GMT, traders will get the opportunity to react to the latest inventory from the U.S. Energy Information Administration (EIA). It is expected to show a 1.8 million barrel drawdown. However, some traders may build a case for a higher number due to the API data.