WTI pulls back slightly from two-week highs near $85.00 ahead of official US inventory data

• WTI has slipped back from two-week highs, after nearly hitting $85.00.
• Bullish inventory data and an easing of fears that the US will release crude oil reserves has supported prices recently.

Front-month futures of the American benchmark for sweet light crude oil, West Texas Intermediary or WTI, nearly managed to hit the $85.00 level during Wednesday Asia Pacific trading hours. In doing so, prices posted a two-week high, though fell about 50 cents short of hitting annual highs set back on 25 October. Since the end of the Asia session and ahead of the start of US trade, oil prices have pulled back a bit, with WTI currently consolidating in the mid-$83.00s, down about 50 cents or 0.6% on the day.

Prices were supported heading into the Wednesday Asia Pacific session by two main factors. Firstly, the latest weekly private inventory report showed a surprise draw of 2.5M barrels in US crude oil stocks. Oil traders look to the release of official US weekly inventory numbers at 1530GMT on Wednesday for confirmation.

Secondly, the monthly oil market report from the US Energy Information Agency (EIA) on Tuesday was seen as lessening the likelihood that the Biden administration will release crude oil reserves from the Strategic Petroleum Reserve in order to address the recent run higher in energy costs. The EIA report forecast a modest pullback in gasoline prices in 2022 to below (on average) $3.0 per gallon, thus easing concerns in the administration about further energy inflation.

Despite the pullback in prices on Wednesday, which comes amid a broader deterioration in risk appetite (US index futures are a little lower in pre-market trade ahead of the release of US inflation numbers), analysts remain bullish on the oil complex. Oil trading giant Vitol Group's CEO Russell Hardy on Tuesday said that demand could exceed 2019 levels in Q1 2022 and that “the possibility of a spike to $100 per barrel is clearly there”.