Oil Price Fundamental Daily Forecast – Bulls Focusing on Tight Supplies Ahead of EIA Reports

U.S. West Texas Intermediate crude oil futures are edging higher for a fourth straight session on Wednesday as traders await the release of a pair of government inventories reports. The trade is also a little tentative ahead of the OPEC+ production decision, due to be released on June 30.

Even with these lingering uncertainties, buyers are in control this week with tight supply worries offsetting concerns about a weaker global economy.

At 09:59 GMT, August WTI crude oil is trading $112.07, up $0.31 or +0.28%.On Tuesday, the United States Oil Fund ETF (USO) settled at $84.75, up $1.82 or +2.19%.

API Inventories Report Supports Prices

The American Petroleum Institute (API) late Tuesday reported a large draw for crude oil of 3.799 million barrels for the week-ending June 24. Analysts were looking for a draw of 110,000 barrels.

The API also reported a build in gasoline inventories of 2.852 million barrels for the week ending June 24, compared to the previous week’s 1.216-million-barrel build.

Distillate stocks saw an inventory build of 2.613 million barrels for the week, compared to last week’s 1.656-million-barrel decrease.

Two EIA Weekly Inventories Reports

Last week, the U.S. Energy Information Administration (EIA) did not release a weekly inventories report for the week-ending June 17 because a voltage surge had prevented it from publishing new data.

Today, the EIA will release two reports. Traders are expecting the report for the week-ending June 17 to show a 1.6 million barrel draw, and the report for the week-ending June 24 to show a 0.9 million barrel draw.

I think traders will be focusing on the net effect of the two reports. Therefore, look for cumulative draw of 2.5 million barrels.

Tight Supply Worries Driving Prices Higher

Prices are up more than 10% since last week because concerns over tight supplies are outweighing fears that a recession may slow demand.

The bulls are likely to remain in control until traders start to see some solid evidence that the aggressive rate hikes from the central banks are driving their respective economies into recession.

Furthermore, this week’s key news event highlights the tight supply situation. According to reports, Saudi Arabia and the United Arab Emirates are being seen as the only two members of the Organization of the Petroleum Exporting Countries (OPEC) with spare capacity to make up for lost Russian supply.

That’s close to the most bullish setup traders can expect.

Daily Forecast

Last week’s sell-off was impressive, but it was not a trend changing event. It was essentially position adjusting by traders who were fearing a recession. Another way of looking at it suggests longs were booking profits in the hopes of a better re-entry price.

Bullish traders found that price at $101.53 on June 22, inside a key retracement zone at $103.85 – $99.82. The fundamentals are cooperating after it was found that Saudi Arabia and the UAE would not be able to raise output significantly to meet recovering demand.