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

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are under pressure Wednesday, shortly before the regular session opening in reaction to an industry report that showed a bigger than expected inventory build in the United States.

Traders are also worried that a surge in coronavirus cases could further dent fuel demand in the world’s biggest oil consumer if the majority of states move to tighter lockdowns. Normally optimistic President Donald Trump also fanned the bearish winds with a gloomy prediction about coronavirus.

At 10:14 GMT, September WTI crude oil is trading $41.46, down $0.46 or -1.10% and September Brent crude oil is at $43.88, down $0.44 or -0.99%.

American Petroleum Institute Weekly Inventories Report

The API estimated on Tuesday a build in crude oil inventories of 7.544 million barrels for the week-ending July 17. The news was disappointing for the bulls, who were looking for a draw of 1.950 million barrels.

The API also reported a draw of 2.019 million barrels of gasoline for the week-ending July 17. Traders were looking for a 1.175-million-barrel draw for the week.

Distillate inventories were down by 1.357 million barrels for the week, compared to last week’s 3.03-million barrel build, while Cushing inventories saw an increase of 716,000 barrels.

Trump Warns US Coronavirus Outbreak Will Probably ‘Get Worse Before It Gets Better’

President Donald Trump warned Tuesday the coronavirus pandemic in the United States will probably “get worse before it gets better.” This rattled traders because a prolonged pandemic could lead to further demand destruction and lower prices.

“That’s something I don’t like saying about things, but that’s the way it is, it’s what we have,” he said during a White House briefing on the pandemic. “You look over the world, it’s all over the world.”

“We understand the disease to a large extent. Nobody’s going to maybe every fully understand it. But we’ll end up with a cure, we’ll end up with therapeutics, we’ll end up with a vaccine very soon.”

“A permanent shut down was really never an option in terms of what we’re doing right now,” he added.

Daily Forecast

At 14:30 GMT, traders will get the opportunity to react to the latest inventories data from the U.S. Energy Information Administration (EIA). Analysts are predicting a 1.3 million barrel draw. This estimate could change for the worst in reaction to the API report.

Yesterday, a European Union stimulus deal lifted oil prices to their highest levels since early March. Traders are now shifting their focus to another U.S. fiscal stimulus program. The last wave of stimulus expires on July 31 so time is of the essence. Even a small delay in getting additional funds to U.S. citizens could cause irreversible damage to the economy.

Not everyone is reading Trump’s comments as bearish. Rystad Energy’s head of oil markets, Bjornar Tonhaugen, said his comments were a shift in strategy from his previous robust emphasis on reopening the U.S. economy. Tonhaugen thinks the market could react positively.

“This could be a positive for oil demand prospects. Instead of an uncontrolled, disruptive second wave of lockdowns, maybe chances have now increased that the United States will eventually get the spread under control,” Tonhaugen said.