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James Hyerczyk
WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower ahead of today’s release of the latest U.S. government weekly inventories report. Prices are consolidating after yesterday’s steep sell-off was fueled by a bearish private industry inventories report. Today’s report could determine whether sellers will extend the break into lower levels or opt for a continued rangebound trade.

At 11:42 GMT, December WTI crude oil futures are trading $39.30, down $0.26 or -0.66% and December Brent crude oil is at $41.21, down $0.35 or -0.84%.

American Petroleum Institute Weekly Inventories Report

The API reported on Tuesday a draw in crude oil inventories of 831,000 barrels for the week-ending September 25, but this draw was more than offset by a build in gasoline inventories. Analysts had predicted an inventory draw of 2.325-million barrels.

The API also reported a build in gasoline inventories of 1.623 million barrels of gasoline for the week-ending September 25 – compared to the previous week’s 7.735-million-barrel draw. Analysts had expected a much smaller 648,000-barrel draw for the week.

Distillate inventories were down by 3.424 million barrels for the week, compared to last week’s 2.104-million-barrel draw, while Cushing inventories rose by 1.610 million barrels.

Oil production in the United States fell during the last week, and it is still down significantly from a high of 13.1 million bpd on March 13. U.S. oil production currently sits at 10.7 million bpd, according to the Energy Information Administration – 2.4 million bpd under those March highs.

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Lingering Demand Worries

Demand worries are also weighing on prices as rising coronavirus cases heading into the northern winter prompted concerns about further restrictions on activity that could curb fuel demand. Another bearish factor is expectations of rising exports from Libya.

Libya’s Sarir oilfield, which was producing more than 300,000 barrels per day (bpd) last year, restarted output after eastern forces lifted an eight-month blockade on energy facilities.

In other news, CEOs of the world’s biggest trading companies are forecasting a weak recovery for oil demand and little movement in the coming months and potentially years.

Furthermore, demand for jet fuel is also a major concern with the outlook for air travel bleak due to coronavirus restrictions and a general disinclination to travel.

Daily Forecast

Going into today’s U.S. Energy Information Administration (EIA) weekly inventories report, due to be released at 14:30 GMT, the markets are consolidating. This suggests that this report will determine whether prices remain rangebound or traders start to explore much lower prices.

The EIA report is expected to show a 1.0 million barrel crude oil build. Like the API report, however, the price direction and volatility will be determined by the fuel numbers – gasoline and distillates. A large gasoline build could crush prices.

For a look at all of today’s economic events, check out our economic calendar.

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