Oil Price Fundamental Daily Forecast – Unexpected API Crude Oil Draw Underpinning Prices; EIA on Tap

West Texas Intermediate and international-benchmark crude oil futures are inching higher on Wednesday after giving back most of its earlier gains. The market was supported shortly after the opening by a report that showed a drop in weekly crude inventories, but traders started to shed those positions as the U.S. presidential election results failed to show a clear winner.

At 08:29 GMT, December WTI crude oil futures are trading $37.78, up $0.12 or +0.32% and December Brent crude oil futures are at $39.84, up $0.13 or +0.33%.

American Petroleum Weekly Inventories Report

The API reported Tuesday a major draw in crude oil inventories of 8.01 million barrels for the week-ending October 30 versus an estimate for an inventory build of 890,000 barrels.

The API also reported a surprise build in gasoline inventories of 2.45-million barrels of gasoline for the week-ending October 27 – compared to the previous week’s 2.252-million-barrel build. Analysts were looking for an 871,000-barrel draw for the week.

Distillate inventories were down by 577,000 barrels for the week, compared to last week’s 5.333-million-barrl draw, while Cushing inventories rose by 981,000 barrels.

Funds Sell Oil on Fears of Virus-Driven Economic Double-Dip

John Kemp, a Reuters market analyst, wrote recently that hedge funds sold petroleum last week as the rising number of coronavirus cases in the United States and Europe fueled fears of a double-dip recession hitting oil consumption.

Hedge funds and other money managers sold the equivalent of 53 million barrels in the six most important petroleum futures and options contracts in the week to October 27.

Last week’s sales essentially cancelled out the previous week’s purchases and were the heaviest selling since the first week of September, according to position records published by regulators and exchanges.

Daily Forecast

If the early price action is any indication, traders should expect a choppy two-sided trade on Wednesday due to the turmoil created by the undetermined presidential election results.

Politics aside, the industry is still facing demand uncertainties in the United States and Europe. The latter especially is very critical because not only are COVID-19 cases rising, but several countries have imposed new restrictions that should led to a drop in fuel demand.

I stand by my original call from over the weekend that OPEC and its allies are going to make a move to control the supply in an effort to combat the expected drop in demand and prevent a supply glut.

Earlier in the week, it was reported by Reuters that OPEC member Algeria backed deferring a planned increase in OPEC+ oil output from January and Russia’s energy minister raised the prospect with the country’s oil producers.

Additionally, sources said OPEC and Russia are considering bigger production reductions next year to support prices.

Later today at 15:30 GMT, the U.S. Energy Information Administration (EIA) is expected to report a 300,000 barrel rise in weekly crude oil inventories. Given the API data, this report could show a surprise.

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