Oil Price Fundamental Weekly Forecast – Supply Driven Rally so API, EIA Numbers Take on Greater Importance
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures finished higher last week amid supply concerns as global demand continued to improve with the easing of pandemic conditions.
“Supply tightness continues to draw on inventories across all regions,” ANZ Research said in a note.
The current rally is being driven by traders willing to buy strength or new highs. This means they really want it and are buying with conviction. Potential upside targets are a series of previous main tops at $74.77, $76.07 and $76.98. Taking out the latter could spike prices into the psychological $80.00 level.
American Petroleum Institute Weekly Inventories Report
The American Petroleum Institute (API) late Tuesday reported a draw in crude oil inventories of 6.108 million barrels for the week ending September 17. Analysts were expecting a decline of 2.400 million barrels for the week.
The API also reported a draw in gasoline inventories of 432,000 barrels for the week-ending September 17 – compared to the previous week’s 2.761-barrel draw. Distillate stocks saw a decrease in inventories this week of 2.720 million barrels for the week, compared to last week’s 2.888-million-barrel decrease.
Cushing inventories fell this week by 1.748 million barrels after last week’s 1.345-million barrel decrease.
US Energy Information Administration Weekly Inventories Report
U.S. crude oil inventories last week fell to the lowest in nearly three years while gasoline stockpiles rose, the Energy Information Administration said on Wednesday.
Crude inventories fell by 3.5 million barrels in the week to September 17 to 414 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.4 million-barrel drop. Inventories now sit at their lowest levels since October 2018, and that tightness, along with strong demand, has helped drive oil prices higher.
Undercutting the optimism, U.S. gasoline stocks rose by 3.5 million barrels to 221.6 million barrels, compared with expectations for a 1.1 million-barrel drop.
Distillate stockpiles, which include diesel and heating oil, fell by 2.6 million barrels versus expectations for a 1.2 million-barrel drop.
This is a supply driven rally so continue to monitor the activity in the weekly API and EIA reports. Demand will continue to have a stronger influence on prices as pandemic concerns ease.
There is another bullish wildcard, however. Reports last week said OPEC and its allies struggled again to pump enough oil in August to meet global demand as it recovers from the coronavirus pandemic, potentially adding to upward pressures on oil prices, Reuters reported.
A perfect storm could be brewing for a spike in prices to the upside. However, gains could be limited if the U.S. Dollar strengthens, gasoline demand declines due to seasonal pressures or production jumps in the Gulf region.