Oil Price Fundamental Daily Forecast – Technical Factors Capping Gains Ahead of EIA Inventories Report

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading slightly higher early Thursday after giving up most of their earlier gains. The price action is likely being driven by profit-taking with the market up considerably over the last eight sessions.

The fundamentals are bullish with demand expectations seemingly rising everyday as the pace of the global economic recovery picks up steam. Concerns over new oil from Iran have been dampened by the slow pace of negotiations and OPEC+ agreed to stick with the current production rate for June.

At 09:43 GMT, July WTI crude oil is at $68.87, up $0.04 or +0.06% and August Brent crude oil is trading $71.43, up $0.08 or +0.11%.

Late Wednesday, an industry report was mixed with crude oil stocks falling more than expected and gasoline stockpiles posting a surprise build.

Later today, the U.S. government will release its inventory numbers later than usual at 15:00 GMT. Crude inventory is expected to drop by 1 million barrels, but traders will be watching the gasoline numbers very closely since the U.S. summer driving season has begun.

Demand Expected to Surge

Crude oil demand is expected to surge later this year, particularly in the United States and China.

The consensus among market forecasters, including the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, is that oil demand will exceed supply in the second half of 2021, which has spurred the recent run in prices.

OPEC+ data shows that by the end of the year oil demand will be 99.8 million barrels per day (bpd) versus supply of 97.5 million bpd.

This rebalancing will be led by resurgent demand in the United States, the world’s biggest oil user, from vehicle consumption this summer, along with rising fuel needs in China, the world’s second biggest oil consumer, and the U.K. as it exits its COVID-19 lockdowns.

American Petroleum Institute Weekly Inventories Report

The American Petroleum Institute (API) on Wednesday reported a draw in crude oil inventories of 5.36-million barrels for the week-ending May 28. Analysts had predicted a draw of 2.114-million barrels for the week.

The API reported a build in gasoline inventories of 2.51-million barrels for the week-ending May 28 – compared to the previous week’s 1.986-million-barrel draw. Analysts had expected a 1.385-million-barrel draw for the week.

Distillate stocks saw an increase in inventories this week of 1.585 million barrels for the week, after last week’s 5.137-million-barrel decrease.

Daily Outlook

The early price action suggests the market could be poised for a short-term setback. We don’t feel it is going to be a trend-changing event, however. Bullish traders may decide to take a little off the top if the EIA reports disappointing crude oil and especially gasoline inventories numbers. However, this is likely to be a short-term event. A near-term pullback would be welcomed by traders who are unwilling to chase prices higher at a one-year high.