WTI hits a new YTD high above $83.60, US CPI eyed

• WTI gains momentum above the $83.00 mark, the highest level since November 2022.
• Crude oil stockpiles came in at 5.85M (Aug. 4), higher than the market consensus of 0.567M.
• Oil traders will monitor July’s Consumer Price Index (CPI), due on Thursday.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around the $83.60 mark so far on Thursday, the highest level since November 2022. An unanticipated increase in EIA crude oil inventories alleviated concerns about China's sluggish demand.

That said, the concern about the economic slowdown in China exerts pressure on WTI prices as China is the major oil consumer in the world. The Chinese inflation data on Wednesday showed the Chinese Consumer Price Index (CPI) YoY fell 0.3% in July from 0% prior, and the market consensus anticipated a -0.4% decline. Meanwhile, the Producer Price Index (PPI) declined 4.4% YoY, compared to the 4.1% decrease YoY expected and a 5.4% drop prior. Additionally, China's crude oil imports in July decreased 18.8% from the previous month to the lowest daily rate since January.

However, a steep drawdown in US crude oil inventories boosts WTI prices. The Energy Information Administration (EIA) showed on Wednesday that crude oil stockpiles came in at 5.85M for the week ending August 4, higher than the market consensus of 0.567M. Meanwhile, Baker Hughes reported that the number of US rigs decreased to 525 for the week of August 4, 2023, from 623 in the week ending January 13, 2023.

Furthermore, the recent recovery in WTI is driven by prolonged voluntary limits in Saudi Arabian output as well as increased global demand. Last week, Saudi Arabia announced it would extend its voluntary oil output cut of one million barrels per day (bpd) through September. In the meantime, Russia's oil exports will also decrease by 300,000 bps in September.

Oil traders will closely watch July’s Consumer Price Index (CPI), due on Thursday. The inflation figure is expected to rise from 3% to 3.3%, and the core inflation figure is expected to stay at 4.8%. These events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around the WTI price.