Oil Price Fundamental Daily Forecast – Rebounding Ahead of EIA Inventories ReportThroughout October, crude oil prices were underpinned by the notion that OPEC and its allies would agree to deepen production cuts at their December 5-6 meeting. However, this is no longer a given because Russia is apparently balking at the prospect of deeper oil production cuts.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading marginally lower on Wednesday after two days of aggressive selling pressure. The attempted recovery from early session weakness is likely being fueled by short-covering and position-squaring ahead of the government storage report later in the session.
The sell-off on Tuesday and earlier today was fueled by an industry inventories report that showed a surge in U.S. stockpiles, concerns over lower global demand growth and worries over the lack of progress in U.S.-China trade negotiations.
American Petroleum Institute Weekly Inventories Report
Late Tuesday, the API reported a crude oil inventory build of 5.954 million barrels for the week-ending November 14. Traders were looking for a 1.543 million barrel build,
According to oilprice.com, “After today’s inventory move, the net draw for the year now sits at just 2.81 million barrels for the 47-week reporting period so far, using API data.”
The API also reported a build of 3.354 million barrels of gasoline for the week-ending November 14, almost quadruple the build that analysts predicted, which was for a build of 870,000 barrels.
Distillate inventories saw a draw of 2.19 million barrels for the week, while Cushing inventories fell by 1.351 million barrels.
New Trade Deal Worries
During a meeting with his Cabinet on Tuesday, President Donald Trump threatened higher tariffs on Chinese goods if that country does not make a deal on trade. Trump’s comment is likely a response to reports that the two economic powerhouses have reached an apparent stalemate in trade negotiations that have lasted nearly two years.
“If we don’t make a deal with China, I’ll just raise the tariffs even higher,” Trump said in the meeting.
Demand Concerns Increase
The longer the trade war continues, the worse the demand situation will get. Even if a trade deal is signed in December, it will take months before demand starts to rise and perhaps a year before demand rises to pre-trade war levels.
OPEC to the Rescue?
Throughout October, crude oil prices were underpinned by the notion that OPEC and its allies would agree to deepen production cuts at their December 5-6 meeting. However, this is no longer a given because Russia is apparently balking at the prospect of deeper oil production cuts.
This issue is likely to be the source of heightened volatility as we approach the meeting dates.
All eyes will be on U.S.-China trade relations and the U.S. Energy Information Administration (EIA) weekly inventories report, due to be released at 15:30 GMT.
The early estimate called for a 1.4 million barrel build for the week-ending November 14. However, given the huge number reported by the API, the U.S. inventories number is likely to come in higher than the estimate.