Oil Price Fundamental Daily Forecast – Rally Could Extend if EIA Reports Large Drawdown

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are surging on Wednesday shortly before the regular session opening in reaction to a bigger than expected draw down in U.S. inventories, according to an industry report. Additionally, there are new concerns over a supply disruption with major U.S. producers evacuating rigs in the Gulf of Mexico ahead of a potential tropical storm.

At 10:42 GMT, September WTI crude oil is trading $59.29, up $1.35 or +2.33%, and September Brent crude oil is at $65.59, up $1.43 or +2.23%.

American Petroleum Institute Weekly Inventories Report

Late Tuesday, the API reported a larger-than-expected crude oil inventory draw of 8.129 million barrels for the week-ending July 4. Analysts were looking for a smaller draw of 3.081 million barrels.

After several weeks of consecutive declines, the net build is just 13.56 million barrels for the 28-week reporting period so far this year, using API data.

The API also reported a 257,000-barrel draw in gasoline inventories for the week-ending July 4. Analysts had forecast a larger draw in gasoline inventories of 1.301-million barrels for the week. Distillate inventories grew by 3.690 million barrels for the week, while inventories at the Cushing, Oklahoma futures hub fell by 754,000 barrels.

Weather Worries

Fear of a supply disruption is also supporting prices on Wednesday with major producers evacuating oil platforms and shutting down production in the Gulf of Mexico as a tropical disturbance may become a storm later on Wednesday or Thursday.

Other News

According to the Energy Information Administration (EIA), U.S. crude oil production is forecast to rise to a record of 12.36 million barrels per day (bpd) in 2019 from the high of 10.96 million bpd last year.

Daily Forecast

The current sideways action and the bouncing between technical 50% levels suggests prices are nearly balanced at this time, which means it may take some fresh stimulus to move prices out of the range.

Increased demand is not likely to be a factor unless the U.S. and China surprise with a trade deal, or Federal Reserve Chairman Jerome Powell says the economy is strong at today’s Congressional hearing.

Supply news is likely to be the price driver today. At 14:30 GMT, the EIA will release its weekly inventories report. It is expected to show a draw of 1.9 million barrels. Traders could extend today’s early rally if the decline comes in bigger-than-expected.

Traders are also keeping an eye on the simmering situation between the United States and Iran.