Oil Price Fundamental Daily Forecast – Pressured by Demand Concerns, Supported by Middle East Tensions

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Thursday. Yesterday’s volatile price action just indicates we’re in a rangebound trade, capped by worries over global demand and underpinned by tensions in the Middle East.

Actually there is more to the limited gains than the forecasts for lower demand. There are also worries about rising U.S. production. Furthermore, the market is also being supported by the OPEC-led supply cuts and U.S. sanctions against Venezuela and Iran. Although these factors may eventually be offset by climbing U.S. production.

At 08:26 GMT, September WTI crude oil futures are trading $56.22, up $0.34 or +0.59% and September Brent crude oil is at $63.55, up $0.38 or +0.59%.

U.S. Energy Information Administration Weekly Inventories Report

According to the EIA, U.S. crude oil inventories declined 10.8 million barrels in the week ending July 19. Traders were expecting the EIA to report an inventory draw of 4.2 million barrels.

Gasoline inventories fell by 200,000 barrels last week, following the prior week’s 3.6 million barrel increase. Gasoline production, the EIA said, averaged 10.1 million bpd last week, up from 9.9 million bpd a week earlier.

Distillate fuel inventory increased 600,000 barrels. During the week-ending July 12, distillate fuel inventories jumped 5.7 million barrels. Production last week averaged 5.2 million barrels per day, versus 5.4 million bpd a week earlier.

Additionally, refineries processed 17 million bpd in the seven days to July 19, down from 17.3 million bpd processed on average in the previous week.

Daily Forecast

We essentially have a tug of war in the market which is contributing to the rangebound trade. This condition is expected to continue until the economic data worsens or improves.

On Wednesday, purchasing manager index data from the U.S. and Europe confirmed the concerns over slowing growth amid the trade war between the United States and China.

Central bank officials will try to slow down the weakness in the global economy by cutting rates. However, these moves aren’t expected to have an immediate effect on crude oil demand.

The United States and China are scheduled to resume trade talks on Monday, but the two economic powerhouses may not even be close to a settlement. Crude oil traders showed limited reaction to this news, perhaps signaling a lack of confidence in the process.

The tension in the Middle East is likely to linger, but unless there is a major conflict that leads to a supply disruption, prices are not likely to move much.