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Oil Price Fundamental Daily Forecast – Weaker Ahead of Potentially Bearish API Inventories Report

James Hyerczyk
·3-min read

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Tuesday while continuing to be trapped inside last Thursday’s wide range, suggesting a volatile move may be right around the corner. The trigger for a volatile breakout of the tight trading range could be today’s American Petroleum Institute (API) inventories report, or Wednesday’s U.S. Energy information Administration’s weekly report.

At 13:15 GMT, September WTI crude oil is trading $40.39, down $0.62 or -1.51% and December Brent crude oil is at $44.20, down $0.71 or -1.58%.

Prices were supported on Monday by better-than-expected manufacturing PMI data from Asia, Europe and the United States, but traders have already moved on from that old news. Traders are now shifting their focus on the U.S. coronavirus aid package, the inability to contain the spread of coronavirus and this week’s oil inventories numbers.

Briefly, U.S. lawmakers said they made progress in the coronavirus aid talks, and U.S. House Speaker Nancy Pelosi will meet again with Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows on Tuesday, raising hopes for a breakthrough in the impasse between Republicans and Democrats.

The two parties let a $600-per-week enhanced unemployment benefit, which provided a lifeline for the tens of millions of Americans who lost their jobs due to the pandemic, expire on Friday. Skipping the payment this week could weigh on fuel demand.

Meanwhile, the number of COVID-19 cases continued to mount globally. Additionally, the World Health Organization (WHO) also added the road to normality would be long.

“News from Asia and Europe are adding up to concerns that the infection crisis may now not be just limited to the U.S. and Brazil, but also to the rest of the world via a second wave,” said Paola Rodriguez Masiu from Rystad Energy.

Further denting fuel demand, cities from Manila to Melbourne are tightening lockdowns to battle new infections, while Norway has stopped cruise ship traffic in the latest European travel alarm.

Daily Forecast

The price action suggests investors are expecting more downward pressure on oil, but bears are not confident enough to initialize a move until all the facts about demand are in.

Additionally, analysts estimate that U.S. refined product stockpiles rose last week, according to a preliminary Reuters poll ahead of data from the API at 20:30 GMT. This news combined with the tapering of production cuts by OPEC+ could trigger a sharp break, but at the very least, should put a lid on prices.

This article was originally posted on FX Empire

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