WTI renews fortnight low near $98.00 on API inventories, focus on inflation, EIA data

• WTI crude oil stays defensive after declining to two-week low on API stockpile data.
• Private oil inventories rose 1.618M versus -3.479M prior, Weekly EIA Crude Oil Stocks Change expected to print a draw.
• Trouble for European gas, Russia-Ukraine crisis fail to recall energy bulls as inflation woes join China’s “zero covid tolerance” policy.

WTI crude oil prices drop to a two-week low following weekly private oil inventory data, before bouncing off $98.00 during the initial Asian session on Wednesday. The energy benchmark’s latest rebound to $98.40, however, remains doubtful amid sour sentiment and anxiety ahead of the key data releases.

That said, the weekly prints of the American Petroleum Institute’s (API) Crude Oil Stock data for the period ended on May 6 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 sticks to its “Zero Covid Tolerance” policy despite the World Health Organization’s (WHO) 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.

Elsewhere, fears of global economic slowdown gradually spread as the major central bankers dial back easy money. On Tuesday, multiple Fed policymakers crossed wires to convey their take on the US central bank’s next moves. Most of them, including Federal Reserve Bank of Richmond President Thomas Barkin and NY Fed President John Williams, backed a 50 bps rate hike. However, comments from Cleveland Fed President and FOMC member Loretta Mester recalled the bears as she said, “They don't rule out a 75 basis points rate hike forever”.

Alternatively, a need for diversion into the European gas supplies, previous through Ukraine, joins the bloc’s oil embargo on Russian imports to keep the buyers hopeful. However, the risk-off mood underpins the US dollar and fails to entertain buyers.

Moving on, April month Consumer Price Index (CPI) 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 offer immediate direction to the black gold. Following that, the US CPI data will be crucial amid hopes of the first softer inflation reading, 8.1% YoY versus 8.5% prior, in many years.

Read: US April CPI Preview: Has inflation peaked?

It should be noted that 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.

Technical analysis

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.