Oil Price Fundamental Daily Forecast – EIA Report Expected to Show 1.4M Draw

James Hyerczyk
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U.S. West Texas Intermediate and international-benchmark Brent crude oil are trading lower shortly before the U.S. opening, pressured by a bearish private industry report and worries about the possibility of increased output from an OPEC-led group.

At 0800 GMT, August WTI crude oil is trading $65.89, down $0.39 or -0.59%. August Brent crude oil is at $75.39, down $0.49 or -0.65%.

According to the American Petroleum Institute (API), U.S. crude oil inventories fell 730,000 barrels. Investors were expecting a much larger draw of 2.744 million barrels.

However, the API also reported a surprise buildup in gasoline inventories for the week-ending June 8 in the amount of 2.33 million barrels. Analysts has expected a much smaller build of 443,000 barrels.

Distillate inventories also saw a surprise build this week of 2.1 million barrels, compared to an expected build of a modest 200,000 barrels, while inventories at the Cushing, Oklahoma, site fell by 730,000 barrels.

Forecast

We continue to expect a choppy, two-sided trade as the major players remain reluctant to take any major positions ahead of the OPEC meeting in Vienna on June 22. There are just too many unknowns at this time including whether to increase production due to supply concerns over the geopolitical tensions in Venezuela and the upcoming sanctions against Iran.

Earlier in the week, Iraq said that a move toward increased output was not a given despite the recent headlines that drove prices sharply lower. This news helped fuel a short-covering rally earlier in the week. Last week, the market found support after Venezuela threatened force majeure which would’ve further reduced global supplies.

Traders are also worried about increasing U.S. output. Last week, the U.S. Energy Information Administration said that for the week-ended June 1, U.S. production had increased to 10.800 million bpd.

The international supply/demand news is mixed this week. Nigeria reported diminishing oil exports in the wake of force majeure on Bonny Light oil. However, Saudi Arabia and Russia this week reported increased oil production for the month of May, at 10.0 million bpd and 11.09 billion bpd respectively.

Today’s EIA report, due to be released at 1430 GMT, is expected to show a 1.4 million barrel draw down. This report is likely to fuel some volatility and could set the tone into the close.

This article was originally posted on FX Empire

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