Oil Price Fundamental Daily Forecast – Prices Dip Slightly on Reports Iran May Agree to Small Production Hike

U.S. West Texas Intermediate and international-benchmark Brent crude oil settled sharply higher as investors continued to position themselves ahead of a key meeting of OPEC producers that may decide to increase global output. Traders primarily ignored the weekly U.S. Energy Information Administration’s inventories report that showed mixed results.

Volatility was the theme on Wednesday as bearish traders continue to support the notion that Saudi Arabia and Russia would push for at least a 1 million barrel per day increase in production, while bullish investors priced in opposition to the increase by Iran, Iraq and Venezuela.

According to the EIA, U.S. crude inventories fell by 5.9 million barrels in the week-ending June 15, traders were looking for a draw of 2.1 million barrels.

Gasoline stockpiles rose by 3.3 million barrels, while inventories of distillate fuel, jumped by 2.7 million barrels, the EIA reported. Implied demand for both fuel types weakened by more than 550,000 barrels per day.

Additionally, in a sign of strong demand, U.S. refineries processed a seasonal record of 17.7 million barrels per day (bpd) of crude oil last week, according to the EIA.

Weekly U.S. production remained at a record 10.9 million bpd.

Also supporting prices was a drop in Libyan supplies due to the collapse of an estimated 400,000-barrel storage tank. This news helped widen the spread between Brent crude oil and WTI crude oil.

Forecast

Crude oil prices are trading lower early Thursday, but inside yesterday’s range. The market is currently under “OPEC-Watch” with many of the major players on the sidelines until the cartel along with Russia makes its decision about production rates at its meeting in Vienna on June 22-23.

At 0517 GMT, August WTI crude oil is trading $65.46, down $0.24 or -0.37% and August Brent crude oil is at $74.34, down $0.40 or -0.54%.

Prices are under pressure on reports that Iran could be swayed to agree to a small increase in OPEC crude output after vigorously defending continued production cuts earlier in the week. Prices could drop even further later in the session if this move encourages Iraq and Venezuela to make a similar concession. Both countries also threatened to veto a production cut earlier in the week