U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Wednesday, shortly before the regular session opening and the release of the U.S. government weekly inventories report at 14:30 GMT.
Traders appear to be shrugging off a private industry report that showed a rise in crude supply and concerns that growing numbers of coronavirus cases may be dampening demand. Helping to underpin prices may be the same private industry report that showed a decline in gasoline supply.
Weekly American Petroleum Institute Weekly Inventories Report
Late Tuesday, the American Petroleum Institute (API) reported a build in crude oil inventories of 691,000 barrels for the week-ending September 18. Analysts were looking for an inventory draw of 2.256-million barrels.
The API also reported a draw in gasoline inventories of 7.735 million barrels of gasoline for the week-ending September 11 – compared to last week’s 3.762-million-barrel build. Analysts had expected a much smaller 614,000-barrel draw for the week.
Distillate inventories were down by 2.104 million barrels for the week, compared to last week’s 1.123-million-barrel draw, while Cushing inventory rose by 298,000 barrels.
Bearish Factors Adding Up
Surging infections in countries including India, France and Spain and new restrictions in Britain have renewed worries about demand, just as more supply may come from Libya. In the United States, the COVID-19 death toll has passed 200,000.
According to Reuters, OPEC faces a new challenge in that Libya, an OPEC member exempt from the supply cut, is aiming to boost supply after an easing of the country’s conflict. Still, previous recoveries have not lasted.
Sentiment remains fragile so I wouldn’t be surprised by a new leg down on the daily chart, but this week’s price action so far, suggests traders may have to settle for a rangebound trade.
The market is holding up well despite the stronger U.S. Dollar that tends to weigh on demand for dollar-denominated crude oil and rising crude oil supplies. Nonetheless, buyers are still facing headwinds due to the surging infections in India, France, Spain and Britain. More supply from Libya is also a real concern.
Later today at 14:30 GMT, the U.S. Energy Information Administration (EIA) will release its weekly inventories numbers. The report is expected to show that U.S. crude oil and gasoline stocks likely fell last week, while distillate inventories including diesel, are expected to have risen, Reuters polling showed.
For a look at all of today’s economic events, check out our economic calendar.