Oil Price Fundamental Daily Forecast – Rangebound Until Traders Get Stimulus, Fed Guidance

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading steady to lower on Tuesday shortly before the regular session opening in New York. The market is being underpinned by the hopes of fresh fiscal stimulus measures by the U.S. government, and capped by demand concerns over rising coronavirus cases around the world.

At 11:56 GMT, September WTI crude oil futures are trading $41.44, down $0.16 or -0.38% and September Brent crude oil futures are at $43.50, up $0.09 or +0.21%.

To put it another way, friendly supply fundamentals are helping to put in a floor, while the economic and demand outlook is limiting gains. Supply is being supported by the OPEC+ supply cuts although the group is expected to taper some of its production cuts, starting on August 1.

We’ll learn a little more about the U.S. supply situation on Tuesday with the release of the American Petroleum Weekly Inventories report at 20:30 GMT and Wednesday’s weekly inventories report from the U.S. Energy Information Administration. Both are expected to show a 1 million barrel increase.

Traders are monitoring two events outside of the normal fundamental data. The first is the promise of a big fiscal stimulus package. The second is the U.S. Federal Reserve’s monetary policy decisions. Both events are likely to have a major effect on the demand side of the equation.

The fiscal stimulus package could boost prices, but it’s currently being debated by U.S. policymakers. The Republicans are looking for a $1 trillion package and the Democrats are proposing a $3 trillion plan. There is likely to be a compromise by Friday when the previous provisions expire.

Traders are also monitoring the U.S. Federal Reserve as it starts a two-day meeting on Tuesday. The market expects the Fed to leave policy unchanged and to reiterate it will keep interest rates near zero for years to come. Don’t be surprised if the Fed’s message is on the dovish side. Like others, policymakers are concerned over the spread of coronavirus and have said in the near past that the economy is not likely to improve until a vaccine is developed.

We’re expecting prices to continue to drift until traders get some guidance from the supply reports, the stimulus package and the Fed’s outlook.

For a look at all of today’s economic events, check out our economic calendar.