Oil Price Fundamental Daily Forecast – Inching Higher on Trade Optimism, Capped by Increasing Saudi Output

U.S. West Texas Intermediate and international-benchmark Brent crude oil prices are inching higher on Thursday shortly before the regular session opening. Light profit-taking after an almost week-long decline is helping to nudge up prices along with some mild optimism that the U.S. and China may be moving closer to resolving their prolonged trade dispute. Gains are being capped by reports that Saudi Arabia is moving quickly to restore output after the attacks on their production facilities nearly two weeks ago.

At 10:08 GMT, November WTI crude oil is trading $56.62, up $0.13 or +0.23% and December Brent crude oil is at $61.41, down $0.02 or -0.03%.

On Wednesday, WTI and Brent hit their lowest price levels since the September 14 attacks on Saudi Arabia after the release of a bearish inventories report from the U.S. Energy Information Administration (EIA) and a surge in the U.S. Dollar.

U.S. Energy Information Administration Weekly Inventories Report

Prices fell on Wednesday after the EIA reported a 2.4-million barrel build in crude oil inventories for the week-ending September 20. Analysts were looking for a draw of 300,000 to 800,000 barrels.

The EIA also reported a 500,000-barrel increase in gasoline stockpiles for the week to September 20, as well as a 3-million barrel draw in distillate fuel inventories. The decline in distillate fuel inventories was not enough to offset the effect from the crude oil and gasoline inventory builds.

In production, the EIA reported an average daily rate of 10.2 million barrels for gasoline and 5 million barrels for distillate fuels. This compares with 9.5 million bpd of gasoline and 5.1 million bpd of distillate fuels a week earlier.

Saudi Oil Capacity Recovers Faster Than Expected

On Wednesday, Bloomberg reported that Saudi Arabia is recovering faster than expected from the biggest attacks ever on its oil industry, beating its own target for restoring capacity by about a week.

State oil producer Saudi Aramco has boosted total production capacity to more than 11 million barrels a day, according to people with knowledge of the situation.

Daily Forecast

The theme is likely to remain the same on Thursday with the markets being underpinned by any positive comments or developments regarding U.S.-China trade relations, and capped by any positive progress reports on the repairs on Saudi Arabian infrastructure.

Essentially it comes down to supply and demand. With supply recovering and demand growth concerns increasing, momentum is clearly to the downside. We’re getting close to the same bearish state the market was in just before the attacks on Saudi Arabia.

There is some hope for speculative bulls, however. Despite Aramco’s efforts to assure the market, speculation persists that it will take months to repair the extensive damage caused by the attacks. Aramco isn’t likely to fully restore the 5.7 million barrels a day of lost output until the end of November.