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Oil Price Fundamental Daily Forecast – Tightening Supplies, Rising Demand Alleviating COVID Concerns

·3-min read

U.S. West Texas Intermediate and international benchmark Brent crude oil futures finished higher on Friday, led by the global benchmark which topped the $75 a barrel level, putting it in a position to challenge its July top at $76.79 over the near-term. Meanwhile, U.S. crude was supported as domestic supplies tightened further after shrinking to the smallest levels since January 2020.

On Friday, September WTI crude oil settled at $73.81, up $0.19 or +0.26% and October Brent crude oil closed at $75.19, up $0.09 or +0.12%.

Bullish Data from Genscape

Reuters reported that data from information provider Genscape indicted that the inventories at the Cushing, Oklahoma storage hub have continued to draw. Cushing stockpiles were seen at 36.299 million barrels by Tuesday afternoon, down 360,917 barrels from July 23.

Supported by Government Inventories Data

The Cushing inventory data came a day after the U.S. Energy Information Administration (EIA) reported that domestic crude inventories fell by 4.1 million barrels in the week to July 23. This was its lowest level since January 2020. Traders said imports and a production drop contributed to the rise.

Gasoline stocks fell by 2.3 million barrels, more than double forecasts for a 916,000-barrel drop. Distillate stockpiles, which include diesel and heating oil, dropped by 3.1 million barrels, data showed, also exceeding expectations for a 435,000-barrel drop.

Net U.S. crude imports fell last week by 616,000 barrels per day, while weekly field production fell by 200,000 bpd to 11.2 million bpd.

Refinery crude runs fell by 132,000 bpd, and refinery utilization rates slipped 0.3 percentage point, EIA data showed.

Fed Comments, Weaker Dollar, Iran Issues Improve Outlook for Higher Prices

The Fed said on Wednesday the U.S. economic recovery is still on track despite the rise in coronavirus infections. However, since it didn’t set a time to start tapering its bond purchases, Treasury yields fell, dragging down the U.S. Dollar. A weaker U.S. Dollar can boost investor demand for dollar-denominated commodities, including crude oil.

Further supporting the outlook for tighter supplies was a statement from Iran blaming the United States for a pause in nuclear talks, which could mean a delay in a return of Iranian barrels to the market.

US Oil & Gas Rig Count Falls for First Week in Eight – Baker Hughes

U.S. energy firms cut the number of oil and natural gas rigs operating for the first time in eight weeks, even though the rig count rose for 12 straight months, amid an industry stampede to reward investors with share buybacks instead of boosting production.

The U.S. oil and gas rig count, an early indicator of future output, fell by three to 488 in the week to July 30, according to data on Friday from energy services firm Baker Hughes Co.

Short-Term Outlook

Traders are watching the COVID developments for any signs of demand destruction, however, even with the number of cases rising globally, so far nothing is showing up in the demand numbers to suggest near-term problems.

“While the risk to the demand outlook could increase due to governments across Europe reducing permission for public gatherings, we note that markets have already undergone several rounds of mobility restrictions… yet, the global recovery was not significantly derailed,” analysts from Citi said in a note.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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