Oil Price Fundamental Daily Forecast – Will EIA Report Validate API’s Massive Draw?

Lingering concerns about global growth amid the escalating trade war between the United States and China, the world’s two biggest crude oil consumers, are likely to cap gains. On the other hand, simmering tensions between the United States and Iran should continue to underpin prices.
James Hyerczyk
EIA Oil Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Wednesday shortly ahead of the regular session opening. Traders, for the most part, are ignoring concerns about a possible U.S. recession and worries about lower demand growth. The catalysts behind the rally are a bullish weekly industry inventories report and expectations of similar results in the weekly government report.

At 09:38 GMT, October WTI crude oil is at $55.70, up $0.77 or +1.42% and December Brent crude oil is at $59.00, up $0.60 or +1.03%.

American Petroleum Institute Weekly Inventories Report

The API report late Tuesday after a massive crude oil inventory draw of 11.1 million barrels during the week-ending August 23. Analysts were looking for a 2.112-million barrel draw.

For the year, the API data shows a net draw of 19.08 million barrels for the 35-week reporting period.

The API also reported a 349,000-barrel draw in gasoline inventories for the week-ending August 22. Analysts predicted a draw in gasoline inventories of 388,000 barrels for the week.

Distillate inventories fell by 2.5 million barrels for the week, while inventories at Cushing fell by 2.4 million barrels.

Economic Growth Worries Eased

For some traders, the API news helped ease worries about economic growth due to the U.S.-China trade war.

“The mammoth crude inventory draw has, at least for the time being, put to rest those U.S. recessionary doom and gloom fears that have been hanging over oil markets like a dark cloud,” said Stephen Innes, managing partner at Valour Markets.

No Talks Between US and Iran

Earlier in the week, crude oil prices fell after French President Emmanuel Macron pushed for a meeting between the U.S. President Trump and Iranian President Hassan Rouhani at the G7 Summit in France.

However, renewed hopes for talks between Trump and Rouhani were dealt a blow on Tuesday when Rouhani said there would be no meeting until economic sanctions imposed on Tehran are removed.

“No positive developments will happen in Iran-US ties without them lifting sanctions and abandoning their hostile actions,” Rouhani said in a televised speech – a day after Trump said there was a “really good chance” the men could meet in the coming weeks.

“We will change our behavior towards those who imposed sanctions on the Islamic Republic of Iran and committed economic terrorism, if they show remorse,” Rouhani added.

Daily Forecast

Lingering concerns about global growth amid the escalating trade war between the United States and China, the world’s two biggest crude oil consumers, are likely to cap gains.

On the other hand, simmering tensions between the United States and Iran should continue to underpin prices.

It all adds up to a rangebound trade over the near-term.

Today, traders will get the opportunity to react to the latest weekly Energy Information Administration (EIA) inventories report for the week-ending August 23. It is expected to show a 2.8 million barrel draw. However, these expectations could rise given the huge API number.

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