Oil Price Fundamental Daily Forecast – Supply Worries Weigh on Prices Ahead of EIA Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply lower early Wednesday for a number of reasons including worries that a nuclear deal between the United States and Iran will lead to an increase of global supply, an expected build in U.S. crude oil stockpiles and to a lesser extent, increased coronavirus cases in parts of Asia and South America. However, helping to limit losses is optimism over the expected pace of the global economic recovery.

At 09:05 GMT, July WTI crude oil futures are trading $64.59, down $0.91 or -1.39% and July Brent crude oil is at $67.85, down $0.86 or -1.25%.

Oil Settles Lower on Reports of Potential Iran Nuclear Deal

Oil settled lower on Tuesday, tumbling from a two-month high after media reports said the United States and Iran have made progress on reviving a deal restricting the OPEC country’s nuclear weapons development, which would boost crude supply.

Prices plunged on the reports that Russian ambassador to the United Nations Mikhail Ulyanov said significant progress had been made, but losses stopped after he said on Twitter that negotiators need more time to finalize an agreement.

If the United States lifts sanctions on Iran, the country could boost oil shipments, adding to global supply.

EIA Expected to Announce Crude Oil Inventories Build

Analysts forecast U.S. crude inventories to have risen by 1.6 million barrels last week, according to a Reuters poll. The weekly report from the U.S. Energy Information Administration (EIA) is due to be released at 14:30 GMT.

The American Petroleum Institute (API) on Tuesday reported a build in crude oil inventories of 620,000 barrels for the week-ending May 14. Analysts had predicted a build of 1.680 million barrels for the week.

The API also reported a draw in gasoline inventories of 2.837 million barrels for the week ending May 14, partially offsetting the previous week’s 5.640-million-barrel build. Analysts had expected an 886,000 barrel draw for the week.

Distillate stocks saw a decrease in inventories this week of 2.581 million barrels for the week, after last week’s 872,000-barrel decrease.

Cushing inventories rose this week by 53,000 barrels.

Virus Worries Offset by Economy Reopenings

Singapore and Taiwan have reinstated lockdown measures and India has experienced a plunge in fuel demand after imposing restrictions to curb infections. However, Britain further eased coronavirus restrictions on Monday and Europe is starting to reopen cities and beaches. Meanwhile, new cases in the United States fell further.

This news is having a limited effect on crude oil prices because most professionals believe the bad news is a short-term event and conditions will change as more vaccines are made available to the hot spots.