US crude oil inventories are expected to see a draw of 3.2m barrels in the week to July 3^rd, whilst gasoline stocks are expected to drop by 1.2m barrels.

Yesterday the American Petroleum Institute (API) reported a build in US crude stocks of 2m barrels, whilst gasoline stockpiles fell by 1.8m barrels. Crude at the Cushing, Oklahoma, hub rose 2.2m barrels.

Meanwhile the U.S. Energy Information Administration presented a more bullish fundamental case and raised its West Texas Intermediate (WTI) price forecast for 2020 to $37.55 a barrel, up almost 7% from the June forecast.  2021 prices are forecast to average $45.70 in 2021, a gain of 4% from before. The EIA said changes in supply and demand have shifted global oil markets from an estimated 21 million barrels per day of oversupply in April to inventory draws in June.

The EIA also said that it expects high inventory levels and surplus crude oil production capacity to cap the upside for oil prices in the coming months. However, as inventories decline into 2021, the upward pressure on prices should increase.

Other highlights from the EIA Short Term Energy Outlook:

• Brent crude prices forecast at $40.50 in 2020 and $49.70 in 2021
• Average US crude oil production to fall in 2020 and 2021 as forecast WTI spot prices remain less than $50/b through 2021. EIA forecasts that U.S. crude oil production will average 11.6 million b/d in 2020 and 11.0 million b/d in 2021.
• US liquid fuels consumption will average 18.3 million b/d in 2020, down 2.1 million b/d from 2019. Declines in US liquid fuels consumption vary across products. From 2019 to 2020, EIA expects jet fuel consumption to fall by 31% and gasoline and distillate fuel consumption to both fall by 10%.

Crude oil has been stuck in a tight range around $40 in recent days but continues to exert an upwards bias despite the potential head and shoulders reversal pattern evident on the chart.