WTI Retreats Near $98.00 On Inventories, EIA Data

The American WTI crude oil prices dropped to a fortnight low after weekly private oil inventory data had been released on Tuesday, before bouncing around $98.00 during the initial Asian session on Wednesday.

The energy benchmark’s latest rebound to $98.40, however, remains doubtful amid sour market sentiment and uncertainty just some hours ahead of the key CPI data releases.

The weekly US Petroleum Institute’s (API) reading of Crude Oil Stock for the period ended on 6 May flashed an addition of 1.618M barrels versus the previous contraction of 3.479M. Among the key challenges to the oil buyers are ongoing covid-led lockdowns in China and the growth fears due to a jump in the inflation, as well as the global oil producers’ resistance to inflate output.

On the contrary, the hardships for European energy supplies due to the ongoing Russia-Ukraine war should have favored the black gold, but could not of late. China adheres to its Zero Covid Tolerance policy despite the World Health Organization’s push to ease the rigid activity restrictions in Shanghai and Beijing.

The lockdowns in the world’s largest industrial players pose a serious threat to the global supply chain and the oil prices. Concerns and fears of global economic slowdown gradually spread as the major central bankers dial back easy money.

A number of Fed policymakers spoke on Tuesday to convey their take on the US central bank’s next moves. Most of them, including Thomas Barkin and John Williams, backed a 50 bps rate hike. Comments by FOMC member Loretta Mester recalled the bears as she said, “They don’t rule out a 75 basis points rate hike forever”.

April’s CPI reading and Producer Price Index (PPI) for China, expected 1.8% and 7.7% YoY respectively versus 1.5% and 8.3% previous readouts in that order, will provide direction to oil. The US CPI data will be crucial to consolidate hopes of the first softer inflation reading, 8.1% YoY versus 8.5% prior, in several years.

The weekly official oil inventory data, released from the Energy Information Administration (EIA), expected -1.2M versus 1.302M prior, will also direct short-term WTI moves.

Technically; although the monthly support line restricts WTI crude oil’s immediate downside around $98.00, the 21-DMA around $103.10 joins bearish MACD signals and downbeat RSI (14) to challenge corrective pullback.