WTI retraces from a 10-month high, hovers around $88.20 amid the surge in US inventories

• WTI prices hold ground around $88.25 amid the unexpected surge in US inventories and stronger USD.
• US crude oil inventories rose by nearly 4M barrels for the week ending September, the first rise in five weeks.
• A tighter supply by voluntary oil production cuts by Saudi Arabia and Russia might lift WTI prices.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around the $88.25 mark so far on Thursday. WTI prices pullback from the 10-month high amid the unexpected surge in US inventories and the renewed USD demand.

US crude oil inventories increased by nearly 4M barrels for the week ending September, the first rise in five weeks. The US Energy Information Administration (EIA) reported that crude oil stockpiles increased by 3.95M barrels compared to a drawdown of 6.30M barrels in the previous week, while the market anticipated a drawdown of 2.48M barrels. Furthermore, the American Petroleum Institute (API) showed a 1.174M barrels build in the US crude oil inventories for the week ending of September 8 compared to the previous week’s -5.521M barrels. A surprising surge in US crude stocks suggests that demand fell when the summer driving period in the US ended.

OPEC, on the other hand, maintained its projection for robust growth in global oil demand in 2023 and 2024 despite challenges such as rising interest rates and higher inflation. In a monthly report, OPEC anticipated that global oil demand will rise by 2.25 million barrels per day (bpd) in 2024, up from 2.44 million bpd in 2023. Both forecasts were unchanged from the previous month.

Apart from this, a tighter supply by voluntary oil production cuts by Saudi Arabia and Russia has boosted WTI prices in recent weeks. Saudi Arabia and Russia, the world's two largest oil exporters, announced that they would prolong oil output curbs until the end of 2023. Through the end of 2023, Saudi oil output will be closer to 1.3 million barrels per day. That said, the optimistic oil demand outlook from OPEC and a tighter supply might limit the WTI’s downside for the time being.

Moving on, oil traders will keep an eye on the US weekly Initial Jobless Claims, the Producer Price Index (PPI) and monthly Retail Sales due on Thursday. On Friday, the preliminary Michigan Consumer Sentiment Index for September will be released. 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 prices.