Oil Price Fundamental Daily Forecast – Prices Pressured After API Reports Surprise Inventories Build

U.S. West Texas Intermediate and international-bench mark Brent crude oil posted a volatile two-sided trade on Tuesday. Prices were under pressure early as traders reacted negatively to a report from the U.S. Energy Information Agency (EIA) that predicted U.S. shale producers would increase output to 113,000 barrels a day in August.

September WTI crude oil settled at $46.59, up $0.36 or +0.78% and October Brent crude closed the session at $49.08, up $0.40 or +0.82%.

 

Prices rose sharply from their lows shortly before the opening on a report that Saudi Arabia would slash exports in August. The market held on to most of its gains throughout the session, but began selling off late after the American Petroleum Institute reported a surprise rise in U.S. crude stockpiles.

Forecast

Prices could be under pressure early in the session due to the potentially bearish API report. Ultimately, the direction of the market today will be determined by trader reaction to the U.S. EIA weekly inventories report.

According to the API, crude inventories rose by 1.6 million barrels in the week ending July 14 to 497.2 million barrels. Analysts were looking for a draw of 3.2 million barrels.

Gasoline stocks fell by 5.4 million barrels, compared to expectations for a 665,000-barrel decline.

Losses could be limited early Wednesday because of the strength of the gasoline numbers.

At the close, traders were predicting the EIA report would show a 3.6 million barrel draw down. However, this estimate is now up in the air due to the surprise API data.

An inventory build should pressure prices, but a build greater than the API number should drive price sharply lower. Look for prices to rebound on Wednesday if the EIA report shows a draw and for a strong rally to ensue if the draw is larger than the estimate.

The daily chart indicates that we could see volatility since there is room to the upside and the downside.

The target on the upside is $47.33 to $47.45. The downside target zone is $45.49 to $45.09. Based on the current price at $46.42, we could be looking at $1.00 higher or lower at some point today.