Oil Price Fundamental Daily Forecast – Trade Talks News Underpinning Prices While Traders Await EIA Report

U.S. West Texas Intermediate and International-benchmark Brent crude oil futures are trading higher shortly after the regular session on Thursday after traders shrugged off a potentially negative private industry weekly inventories report, choosing instead to focus on positive developments over U.S.-China trade relations. Increased demand for risk as well as better-than-expected U.S. economic data is also helping to attract buyers.

At 12:43 GMT, October WTI crude oil is at $56.34, up $0.08 or +0.16% and December Brent crude oil is at $59.98, up $0.15 or +0.25%.

American Petroleum Institute Weekly Storage Report

Crude oil prices were under pressure early in the session on Thursday after the API announced a surprise crude oil inventory build of 401,000 barrels for the week-ending August 30, compared to analyst expectations of a 3.50 million barrel draw.

After yesterday’s announcement, the net draw for the year is 18.68 million barrels for the 36-week reporting period so far, using API data.

The API report also showed an 877,000-barrel draw in gasoline inventories for the week-ending August 30. Traders were looking for a draw in gasoline inventories of 1.60 million barrels for the period.

Distillate inventories fell by 1.2 million barrels for the week, while inventories at the Cushing, Oklahoma futures hub fell by 238,000 barrels.

U.S.-China Announce Resumption of Trade Talks

Helping to turn around and underpin WTI and Brent crude oil futures early Thursday is the news that the United States and China will resume trade talks. China’s commerce ministry said Beijing and Washington agreed to hold high-level trade talks in early October. On Wednesday, prices soared 4% after China reported better-than-expected services data.

U.S. Economic Reports Mostly Positive

On Thursday, the ADP Non-Farm Employment Change report beat the forecast, helping to boost confidence in the economy. The report showed the private sector added 195K jobs in August versus an estimate of 148K. July’s number was revised lower to 142K.

Revised Nonfarm Productivity rose 2.3%, more than the 2.2 estimate. Revised Unit Labor Costs were up 2.6% versus 2.5%. Weekly Unemployment Claims were 217K versus 215K

Daily Forecast

The direction of the market on Thursday hinges upon the outcome of the U.S. Energy Information Administration’s weekly inventories report, due to be released at 15:00 GMT. It is expected to show a 2.4 million barrel draw down. However, traders are a little nervous ahead of the report because of the API’s reported build.

A larger than expected draw could launch a huge rally in both futures contracts. Gains will be limited if the report is bearish, however, selling pressure is likely to be offset somewhat by the trade talks news.