Oil Price Fundamental Daily Forecast – Shift in Investor Sentiment Underpinning Prices Ahead of EIA Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed shortly before the regular session opening and the release of the government’s weekly inventories report. Both futures contracts are trading inside yesterday’s range which tends to indicate investor indecision and impending volatility. This is likely being caused by a slight change in financial market sentiment.

At 09:58 GMT, July WTI crude oil is trading $53.30, down $0.18 or -0.34% and August Brent crude oil is at $62.18, up $0.21 or +0.34%.

Crude oil prices are consolidating despite an unexpected gain in U.S. inventories as reported by the American Petroleum Institute (API). However, losses are being limited by a recovery in global equities on hopes of a U.S. Federal Reserve rate cut and a weaker U.S. Dollar, which tends to lead to increased demand for dollar-denominated crude oil. The markets are also attracting buyers at key technical support levels.

American Petroleum Institute Weekly Inventories Report

Late Tuesday, the API reported a surprise build in crude oil inventory of 3.545 million barrels for the week-ending May 31. Traders were looking for a 208,000-barrel drawdown in inventories. The net build for the year is now 30.20 million barrels, according to API data.

The API also reported a build in gasoline inventories for the week-ending May 31 in the amount of 2.696 million barrels. Analysts had forecast a build in gasoline inventories of 711,000 barrels.

Distillate inventories rose by a staggering 6.314 million barrels for the period, while inventories at the futures hub in Cushing, Oklahoma rose by 1.408 million barrels.

Supply/Demand Fundamentals

The OPEC-led supply cuts and the U.S. sanctions against Iran and Venezuela continue to provide most of the support, while rising U.S. production and concerns over lower demand due to a global economic slowdown are pressuring prices.

Daily Forecast

WTI and Brent crude oil prices are consolidating at key technical support areas as traders adjust positions ahead of today’s U.S. Energy Information Administration (EIA) weekly inventories report and a potential shift in investor sentiment.

The key level for WTI crude is $52.70. Brent crude oil is building its support base between $62.92 and $60.32.

The shift in sentiment is being fueled by increased demand for risky assets. An easing of tensions over U.S. relationships with China and Mexico are encouraging some short-sellers to book profits. Comments from Fed Chair Jerome Powell on Tuesday also raised the hopes of an earlier than expected rate cut.

At 14:30 GMT, the EIA report is expected to show a 1.7 million barrel draw down. A bigger than expected draw should be supportive.

Increasing demand for risky assets should also be a positive for crude oil prices.