U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching lower on Wednesday ahead of today's government inventories report. The early price action indicates investors are showing little reaction to yesterday's surge in prices, fueled by the hope that the U.S. and China will return to the negotiation table and the small draw reported by the American Petroleum.
At 08:53 GMT, August WTI crude oil futures are trading $54.03, down $0.10 or -0.18% and August Brent crude oil futures are at $61.82, down $0.32 or -0.51%.
Prices rose sharply on Tuesday after President Trump said preparations were being made for him to meet Chinese President Xi Jinping at the G20 summit in Osaka, Japan next week. The summit starts on June 28.
The surge in prices was all about future demand. The price action indicates weak shorts were driven out of the market on the thought that renewed trade talks could eventually lead to a trade deal that could lead to increased future demand.
In other news, prices were under pressure early Tuesday on the news that Japan's exports fell for a sixth straight month in May as China-bound shipments weakened, underlining the impact of the trade war.
Tensions in the Middle East remain high with the U.S. sending 1000 troops into the region. However, without an actual disruption in supply, this story is likely to be pushed to the back-burner.
The OPEC-led production cuts along with the sanctions against Iran and Venezuela continue to provide support. In the meantime, traders are becoming more optimistic that OPEC and its allies will extend the plan beyond the June 30 deadline. The cartel is still trying to hammer out the dates of its important meeting.
American Petroleum Institute Weekly Inventories Report
Late Tuesday, the API reported a small draw in crude oil inventory of 812,000 barrels during the week-ending June 13. Traders were looking for a much larger 2.033-million barrel drawdown in inventories.
The net build is still a very large 34.02 million barrels so far this year.
Gasoline inventories rose during the week-ending June 13 in the amount 1.46 million barrels. Traders were looking for a 1.067 million barrel build. Distillate inventories fell by 50,000 barrels for the week.
Barring any fresh news regarding Trump's meeting with Xi, the direction of the crude oil market on Wednesday is likely to be determined by trader reaction to the U.S. Energy Information Administration's (EIA) weekly inventories report. It is expected to show a 1.5 million barrel draw down. Prices could rise if the draw is bigger than forecast.
This article was originally posted on FX Empire