Oil Price Fundamental Daily Forecast – EIA Expected to Report Drawdown Ahead of Fed Rate Hike

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Wednesday, shortly before the release of the government’s weekly inventories report and major interest rate decision by the U.S. Federal Reserve.

Traders are expecting the report to show a decline in crude stocks, while the Fed is widely expected to raise its benchmark interest rate 75-basis points despite worries about a rapidly slowing economy.

At 12:37 GMT, September WTI crude oil futures are trading $95.81, up $0.83 or +0.87% and September Brent crude oil is at $105.24, up $0.84 or +0.80%. On Tuesday, the United States Oil Fund ETF (USO) settled at $75.18, down $1.04 or -1.36%.

The price action is a little subdued with a private sector report showing lower inventories in the United States and a reduction in Russian gas flows to Europe offsetting concerns about weaker demand and the looming rate hike.

American Petroleum Institute Weekly Inventories Report

The API reported a large draw late Tuesday for crude oil of 4.037 million barrels, while analysts predicted a draw of 1.121 million barrels.

Russia Makes Additional Cuts to Gas Flows

Russia delivered less gas to Europe on Wednesday in a further escalation of an energy stand-off between Moscow and the European Union that will make it harder, and costlier, for the bloc to fill up storage ahead of the winter heating season.

The cuts in supplies, flagged by Gasprom earlier this week, has reduced the capacity of Nord Stream 1 pipeline – the major delivery route to Europe for Russian gas – to a mere fifth of its total capacity.

Nord Stream 1 accounts for around a third of all Russian gas exports to Europe.

IMF Cuts Global Growth Outlook, Issues High Inflation Warning

The International Monetary Fund (IMF) cut global growth forecasts again on Tuesday, warning that downside risks from high inflation and the Ukraine war were materializing and could push the world economy to the brink of recession if left unchecked.

Global real GDP growth will slow to 3.2% in 2022 from a forecast of 3.6% issued in April, the IMF said in an update of its World Economic Outlook. It added that world GDP actually contracted in the second quarter due to downturns in China and Russia.

Short-Term Outlook

More choppy price action ahead as supply and demand issues continue to offset each other. However, today’s Energy Information Administration (EIA) could break the tie at least temporarily. But there’s also the Fed, which could even offset a bullish oil stocks report with a hawkish tone.

The EIA is expected to report a crude oil inventories draw of 1.5 million barrels. On paper, this is potentially supportive. Meanwhile, traders are expecting the Federal Reserve to lift its benchmark interest rate by 75 basis points, which could be a threat to the economy.