Oil Price Fundamental Daily Forecast – Weak Dollar Seems to be Taking Care of Demand Concerns

U.S. West Texas Intermediate and international-benchmark crude oil futures are edging higher early Thursday with traders ignoring a surprise build in U.S. crude oil inventories and worries that a surge in U.S. coronavirus cases could cap fuel demand. Bullish traders also seem to be adjusting to last week’s decision by OPEC+ to taper its current production cuts although the move is not expected to begin until August 1.

At 08:34 GMT, September WTI crude oil is trading $42.21, up $0.31 or +0.74% and September Brent crude oil is at $44.63, up $0.34 or +0.77%.

U.S. Energy Information Administration Weekly Inventories Report

The EIA reported Wednesday that U.S. crude inventories rose by 4.9 million barrels for the week ended July 17. That compared with an average forecast by analysts polled by S&P Global Platts for a decline of 1.9 million barrels.

The EIA also reported gasoline supplies fell by 1.8 million barrels, while distillate stockpiles climbed by 1.1 million barrels. Analysts at S&P Global Platts were looking for a supply decline of 2 million barrels for gasoline and an inventory increase of 280,000 barrels for distillates.

The EIA data also showed crude stocks at the Cushing, Oklahoma storage hub edged up by about 1.4 million barrels for the week.

Late Tuesday, the American Petroleum Institute on Tuesday reported a climb of 7.5 million barrels, according to sources.

Daily Forecast

The market is performing surprisingly well despite the slew of potentially bearish fundamental events. The EIA surprise inventories build, escalating tensions between trading giants U.S. and China, the potential impact on demand of rising coronavirus cases and next month’s tapering of the OPEC+ supply cuts, should be weighing on prices.

Instead, WTI and Brent are hovering close to four-month highs reached earlier in the week. This suggests the extremely weak U.S. Dollar is driving the price action. Remember that crude oil is dollar-denominated so a weaker dollar will drive up foreign demand.

The dollar is being pressured by the announcement of fresh stimulus from Europe and expectations of further fiscal stimulus in the United States. Bullish traders are trying to put the bearish news behind them, while focusing on the global economic recovery.