Oil Price Fundamental Daily Forecast – Worries Over Demand, Rising Stockpiles Pressuring Prices

U.S. West Texas Intermediate and international- benchmark Brent crude oil futures are edging lower on Thursday, weighed down by record high U.S. crude inventories and worries that a rapid resurgence in coronavirus cases could curtail a revival in fuel demand.

At 12:08 GMT, August WTI crude oil is trading $37.38, down $0.63 or -1.66% and August Brent crude oil is at $39.82, down $0.49 or -1.22%.

EIA Report Confirms Crude Inventory Build

The U.S. Energy Information Administration (EIA) reported on Wednesday a 1.4-million-barrel increase in crude oil inventories for the week to June 19, with fuel inventories booking mixed results. Traders were looking for a build of 1.2-million-barrels.

The EIA also reported a draw of 1.7 million barrels of gasoline for the week-ended June 19, compared with a decline of the same size for the previous week. Gasoline production last week averaged 8.8 million barrels daily, up from 8.4 million barrels daily a week earlier.

In distillate fuels, where demand has been slower to recover than in gasoline, the EIA reported an inventory rise of 249,000 barrels for the week to June 19, up from a 1.4-million-barrel draw reported for the previous week. Production of distillates averaged 4.6 million bpd last week, compared with 4.5 million bpd a week earlier.

Refinery runs averaged 13.8 million bpd, up from 13.6 million bpd a week earlier.

Renewed COVID-19 Concerns

Worries about a second wave of COVID-19 cases in several U.S. states, where lockdowns had eased, and a rapid spread of infections in South America and South Asia are expected to keep a lid on fuel demand, traders said. The fear is that even if lockdowns are eased, people will stay home because of the perceived health risks.

Qantas Airways, said on Thursday it expected little revival in international travel until at least July 2021, as it slashed a fifth of its workforce and grounded 100 planes.

“It highlights the reality that we’re talking years before international aviation recovers – probably three to four years,” National Australia Bank’s head of commodity research, Lachlan Shaw said.

Daily Forecast

The tone is turning bearish as investors continue to react to the surge in coronavirus cases although most traders don’t believe a second-wave of infections will be as damaging to the economy as the first-wave. The price action suggests a major price adjustment could be taking place. In the worst case scenario, the crude oil markets could retrace 50% to 61.8% of the first rally.

In other news, at 540.7 million barrels, U.S. crude oil inventories are still above the five-year average for this time of year and demand improvement seems to be going more slowly than hoped, as suggested by the change in EIA fuel numbers.

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