Oil Price Fundamental Daily Forecast – Market Flat Ahead of OPEC+ Output Decision, EIA Stockpiles Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower shortly before the release of the government’s weekly inventories report, and a decision by OPEC and its allies regarding September production levels.

Gains are also being capped after data from an industry group, released last night, showed an unexpected build. This cast doubts on whether the government’s report will show a draw down as estimated.

At 11:12 GMT, September WTI crude oil futures are trading $93.56, down $0.86 or -0.91% and December Brent crude oil is at $96.22, down $1.06 or -1.09%. On Tuesday, the United States Oil Fund settled at $75.93, up $0.80 or +1.06%.

Traders are also responding to the possibility of additional aggressive rate hikes by the Fed in September after three key Fed officials preached the need for further rate hikes until inflation reaches the central bank’s mandate of 2.0%.

Some oil traders feel the economy is teetering on the brink of recession, due to the Fed’s recent string of aggressive 75 basis point rate hikes. However, St. Louis Fed President James Bullard said Tuesday the Fed has the skill to slow inflation without sparking recession.

OPEC+ Expected to Keep Output Unchanged

OPEC and its allies are expected to meet on Wednesday from 11:30 GMT. Sources told Reuters last week that the group would likely keep output unchanged in September, or raise it slightly.

Ahead of the meeting, OPEC+ trimmed its forecast for an oil market surplus this year by 200,000 barrels per day (bpd), to 800,000 bpd, three delegates told Reuters.

American Petroleum Institute Reports Surprise Build

The API reported late Tuesday that U.S. crude stockpiles rose by about 2.2 million barrels for the week-ended July 29. Gasoline inventories fell by 200,000 barrels and distillates by about 350,000.

Short-Term Outlook

Even though OPEC+ may agree to a small increase, it shouldn’t carry much weight since it knows very few of its allies have the capacity to materially meet any production increase requests. Reuters also said Saudi Arabia may be reluctant to beef up output at the expense of OPEC+ partner Russia, hit by sanctions due to the Ukraine conflict.

Prices could get a quick burst if OPEC+ does not increase production at all.

Official data from the U.S. Energy Information Administration (EIA) is due at 14:30 GMT. It is expected to report a 1.4 million drawdown in crude stockpiles. However, traders are bracing for a surprise due to the bearish API numbers.