WTI Recovers Around USD 86.00 On Back of EIA Inventory Data

Front-month WTI futures have leapt above their previous intra-day USD 85.00- 86.00 per barrel trading range to hit highs in at USD 87.00 in recent trade and, at current levels near USD 86.50, now trade back in the green territory on the day.

WTI crude oil still trades about USD 1.50 below Wednesday’s multi-year peaks nearest USD 88.00, but is equally about USD 1.50 up from Asia Pacific session lows, with the latest official US crude inventory report not as bearish as feared.

Wednesday’s private API inventory report had suggested that crude oil stocks had risen by 1.4M barrels last week versus prior expectations for a small draw. However, the official EIA data showed that inventories had risen by just half a million barrels last week.

The fall in distillate stocks of 1.2M barrels was roughly in line with that of the API report, whilst the build in gasoline stocks was much higher at over 5.8M barrels versus 3.5M barrels in the API report.

In terms of the major themes driving crude oil markets right now, amid consensus expectations for robust demand this year, supply-side themes are currently getting more attention. Chief amongst them is OPEC+’s ongoing struggles to lift output in line with recent output quota hikes.

On Wednesday, the IEA said the producer group produced 800K barrels per day less than its production target in December and the recent outage of an Iraqi-Turkish pipeline and attack on UAE infrastructure highlighted the risk of continued underproduction. Meanwhile, with Russia seemingly on the verge of a military incursion into Ukraine, there is uncertainty about what kind of sanctions the world’s third-largest crude oil producer may face and whether this might affect their oil exports.

For now, geopolitics, fears of supply disruption and expectations for continued robust demand will likely keep prices underpinned and analysts will likely continue to call for USD 100 per barrel oil this year.