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Oil Price Fundamental Daily Forecast – Supported by Lower US Inventories, Recovering Demand

The data indicates that supply is being managed through compliance among OPEC+ members as well as U.S. production cuts.
James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international benchmark Brent crude oil futures continue to plow higher on Thursday on the back of lower U.S. crude inventories, OPEC+ supply cuts and gradually higher demand as governments ease restrictions and lockdowns imposed due to the coronavirus crisis.

Shortly before the New York opening at 12:00 GMT, U.S. and Brent crude oil futures are trading at their highest levels since April 9.

At 10:29 GMT, July WTI crude oil futures are trading $34.16, up $0.67 or +2.00% and July Brent crude oil is at $36.40, up $0.65 or +1.82%.

US Energy Information Administration Weekly Inventories Report

The Energy Information Administration (EIA) reported Wednesday that U.S. crude inventories fell by 5 million barrels for the week-ended May 15, marking a second weekly decline in a row. That compared with a forecast by analysts polled by S&P Global Platts for an average increase of 2.4 million barrels.

The EIA data also showed crude stocks at the Cushing storage hub fell by about 5.5 million barrels for the week, easing concerns over tightening storage space.

Wednesday’s EIA report also showed that gasoline supply unexpectedly climbed by 2.8 million barrels, while distillate stockpiles rose 3.8 million barrels. Traders were looking for a supply decline of 3.5 million barrels for gasoline, while distillate stocks were forecast at 3.2 million barrels higher.

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American Petroleum Institute Weekly Inventories Report

The American Petroleum Institute (API) weekly inventories report released on Tuesday showed a large crude oil inventory draw of 4.8 million barrels for the week-ending May 15. Traders were looking for an inventory build of 1.151 million barrels.

The API reported a draw of 651,000 barrels of gasoline for the week-ending May 15. Analyst expectation were for a 2.134-million barrel draw for the week. Distillate inventories were up by 5.1 million barrels for the week, compared to last week’s 4.712-barrel build, while Cushing inventories saw a draw of 5 million barrels.

Daily Forecast

The data indicates that supply is being managed through compliance among OPEC+ members as well as U.S. production cuts. Demand is recovering in North Asia, particularly China, based on recent reports. And as Europe and the U.S. start to open up their economies, the demand should improve in those regions also.

With supply and demand conditions moving in the right direction, we should continue to see support in the crude oil market until prices hit a technical resistance area on the chart, or the coronavirus numbers start to show a rapid increase in the number of cases.

At this point in time, the upside momentum is strong, but it could come to an end quickly if the number of global coronavirus cases continues to hit record one day highs like they did on Wednesday, according to the World Health Organization (WHO).

The U.S. becoming a major hot spot once again will be a major game-changer.

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