Oil Price Fundamental Daily Forecast – Focus Continues on Supply Ahead of EIA Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Wednesday as traders focus on supply ahead of today’s U.S. Energy Information Administration’s (EIA) weekly inventories report. Traders are also shrugging off reports that potential OPEC+ production cuts may not be imminent.

At 07:00 GMT, October WTI crude oil futures are trading $93.97, up $0.23 or +0.25% and December Brent crude oil is at $98.36, up $0.36 or -0.37%. On Tuesday, the United States Oil Fund ETF (USO) settled at $76.84, up $2.16 or +2.89%.

The markets are also being underpinned by an industry report that showed a larger-than-expected drawdown in crude oil supply, but at the same time the buying is not that strong over worries that Iran is close to a deal that will bring more oil into the market.

OPEC+ Output Cut Plans Up in the Air

Since the start of the week, crude oil prices have been supported by reports stating that OPEC stands ready to cut output to correct a recent oil price decline driven by poor futures market liquidity and macro-economic fears, which has ignored extremely tight physical crude supply, according to OPEC’s leader Saudi Arabia.

However, hopes for this potentially bullish development began to fade after nine OPEC sources told Reuters on Tuesday that potential OPEC+ production cuts may not be imminent and are likely to coincide with the return of Iran to oil markets should that country clinch a nuclear deal with the West.

Traders Await EIA Inventories Report after API Data Come Out Mixed

Today’s U.S. Energy Information Administration (EIA) inventories report, due to be released at 14:30 GMT, is expected to show a 2.4 million barrel crude oil drawdown. This will be on top of last week’s 7.1 million barrel decline.

The market is getting a slight boost on Wednesday after the American Petroleum Institute (API) reported a large draw for the week-ending August 19 for crude oil of 5.632 million barrels versus a predicted draw of 448,000 barrels.

The API also reported a build in gasoline inventories the same week of 268,000 barrels for the week ending August 19. Distillate stocks also saw a build of 1.051 million barrels for the same week.

Short-Term Forecast

The price action suggests comments from Saudi Arabia’s Abdulaziz bin Salman on Monday about possible production cuts accomplished his intention to put a floor in the market and shake out a few of the weaker short-sellers.

Although there is chatter that the news may have been a bluff, others are saying it’s not a bluff, but rather delayed until Iran signs the Nuclear Deal and starts to bring new oil to the market. Still others are saying it may be months before Iran starts pumping enough oil to make an output cut viable.

Nonetheless, the bullish news from earlier in the week combined with the API data has put the WTI futures contract in a position to possibly breakout above near-term resistance at $94.26.

Our work on the daily chart suggests bullish news from the EIA report could chase enough short sellers out of the market to fuel a surge through $94.26 with $99.75 the nearest upside target.