WTI recovers back into $86.00s after not as bearish as feared EIA inventory figures

• WTI recently broke above its prior $85.00-$86.00 intra-day tradig range to hit session highs near $87.00.
• The official EIA inventory report wasn’t as bearish as feared, helping WTI recover back into the green on the day.

Front-month WTI futures leapt above their previous intra-day $85.00-$86.00 per barrel trading range to hit highs in at $87.00 in recent trade and, at current levels near $86.50, now trade back in the green on the day. WTI still trades about $1.50 below Wednesday’s multi-year peaks near-$88.00, but is equally about $1.50 up from Asia Pacific session lows, with the latest official US crude inventory report not as bearish as feared. Wednesday’s private API inventory report had suggested that crude oil stocks had risen by 1.4M barrels last week versus prior expectations for a small draw. However, official EIA data showed that inventories had risen by just half a million barrels last week. The fall in distillate stocks of 1.2M barrels was roughly in line with that of the API report, whilst the build in gasoline stocks was much higher at over 5.8M barrels versus 3.5M barrels in the API report.

In terms of the major themes driving crude oil markets right now, amid consensus expectations for robust demand this year, supply-side themes are currently getting more attention. Chief amongst them is OPEC+’s ongoing struggles to lift output in line with recent output quota hikes. On Wednesday, the IEA said the producer group produced 800K barrels per day less than its production target in December and the recent outage of an Iraqi-Turkish pipeline and attack on UAE infrastructure highlighted the risk of continued underproduction. Meanwhile, with Russia seemingly on the verge of a military incursion into Ukraine, there is uncertainty about what kind of sanctions the world’s third-largest crude oil producer may face and whether this might affect their oil exports. For now, geopolitics, supply fears and expectations for continued robust demand will likely keep prices underpinned and analysts will likely continue to call for $100 per barrel oil this year.