WTI crude oil struggles to cheer upbeat API inventories, softer USD above $87.00

• WTI prices remain sluggish around the highest levels in eight years.
• API Weekly Crude Oil Stock dropped below -0.872M prior at the latest.
• DXY prints three-day downtrend amid lackluster markets, easing Russia-linked fears.
• EIA stockpile, risk catalysts can direct short-term moves, bulls pause ahead of the key weekly events.

WTI crude oil prices seesaw around $87.50, grinding higher for the second consecutive day after refreshing the multi-day peak the last Friday.

The US oil benchmark rose to the highest levels since 2014 the previous week amid escalating geopolitical tensions and the market’s hopes of economic recovery. However, the recent indecision over the US Federal Reserve’s (Fed) next move joins pre-NFP caution to test the oil bears. Also challenging the commodity prices could be the Thursday’s Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, meeting.

In doing so, the oil prices also paid little heed to the weekly industry inventory data from the American Petroleum Institute (API). That said, the latest stockpile report marked -1.645M figures for the week ended on January 28, versus -0.872M prior.

It’s worth noting that the US ISM Services PMI for January, 57.6 versus 57.5 expected, joins the Fed’s hawkish halt to test the greenback bears, not to forget expectations of OPEC+ output hike. However, mixed comments from the US Fed officials keep buyers hopeful.

Atlanta Fed President Raphael Bostic said on Tuesday that there is a "real danger" of inflation expectations drifting from the Fed's 2.0% target to 4% or higher. On the other hand, St Louis Fed President James Bullard said that he thinks it is an open question whether the Fed will have to become more restrictive (i.e. raise rates above the "neutral" 2.0%-2.5% zone). 

Amid these plays, US Treasury yields stood firmer around 1.80% while the Wall Street benchmarks also closed positive.

Moving on, weekly official inventory data from the US Energy Information Administration (EIA), expected 1.833M versus 2.377M, will join the US ADP Employment Change for January, expected to ease to 207K from 807K, to direct short-term WTI crude oil moves.

It should be noted, however, that a major attention will be given to Thursday’s OPEC+ meeting and ongoing Russia-Ukraine tussles to forecast short-term oil prices.

Technical analysis

Oil prices seesaw between a six-week-old ascending support line and a fortnight-old trend line resistance, respectively around $86.00 and $88.90, with the buyers seemingly losing upside momentum of late.