Oil Price Fundamental Daily Forecast – EIA Numbers Supportive, but OPEC+ Worries May Be Capping Gains

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Thursday, but well off their highs from the previous session. On Wednesday, the markets touched a two-year high after a bigger-than-expected drawdown in U.S. crude and gasoline stocks confirmed the outlook for robust fuel demand. However, late session profit-taking helped erase most of those earlier gains.

At 05:45 GMT, September WTI crude oil is trading $72.45, up $0.09 or +0.12%. September Brent crude oil is at $74.65, up $0.15 or +0.20%.

Besides the rosy outlook for demand, the markets were also supported by doubts about the future of the 2015 Iran nuclear deal that could end U.S. sanctions on Iranian crude exports.

Perhaps helping to put a lid on gains early Thursday is the stronger U.S. Dollar. This may be weighing on foreign demand for the dollar-denominated commodity.

U.S. Energy Information Administration Weekly Inventories Report

Wednesday’s price action suggested investors were impressed by the weekly inventories report from the EIA. The draw in crude oil was expected, but the drop in gasoline inventories sent out a signal that demand was healthy. Both drops in inventories confirmed the tight supply.

U.S. crude inventories fell by 7.6 million barrels in the week to June 18 to 459.1 million barrels, their lowest since March 2020, the EIA said. The drawdown was nearly double analysts’ expectations in a Reuters poll for a 3.9 million-barrel drop.

U.S. gasoline stocks fell by 2.9 million barrels in the week, compared with analysts’ expectations for an 833,000-barrel rise. Distillate stockpiles, which include diesel and heating oil, rose by 1.8 million barrels versus expectations for a 1.1 million-barrel rise.

Refinery crude runs fell by 225,000 barrels per day in the last week, however, with utilization rates dropping by 0.4 percentage points to a still-strong 92.2%.

Daily Forecast

The EIA report was impressive. “You have a gasoline draw and a crude draw in the same week, so apparent gasoline demand has caught up to all the crude oil going through the refineries,” said Bob Yawger, director of energy futures at Mizuho in New York.

However, some bullish traders may decide to take a little off the top ahead of next week’s OPEC+ meeting. They may be worried that the group may decide to increase output more than expected for August.

Gains could be capped, but don’t expect this to lead to a dramatic change in trend. We’re only looking for a rangebound trade over the short-run. The market remains well supported with buyers probably lining up already for the possibility of more favorable prices.