WTI slips back to 21DMA at $82.50 after less bullish than hoped for US inventory report

• WTI prices have slipped in wake of a less bullish than hoped for US crude oil inventory report.
• WTI have slipped back to their 21DMA at $82.50.

Crude oil prices have turned lower in wake of the latest official weekly US crude oil inventory report. Front-month future prices of the American benchmark for sweet light crude oil, West Texas Intermediary or WTI, has fallen more than $1.0 since the report from above $83.50 to around $82.50, meaning losses on the day currently stand just above 1.0%. For now, WTI seems to be finding some support at its 21-day moving average at $82.50.

The latest crude oil inventory report from the US Department of Energy showed that headline crude oil stocks had risen by just over 1M barrels last week. Some market participants likely expected a draw after Tuesday’s private weekly API inventory data showed US crude oil stocks drawing over 2M barrels. Gasoline and Distillate stocks both saw larger than expected draws of 1.555M and 2.613M barrels respectively.

One factor that might also be weighing on oil prices is a pick-up in the US dollar following a much hotter than expected US Consumer Price Inflation report for October. US yields, particularly in the short-end, are up sharply as market participants upgrade near-term inflation and central bank interest rate forecasts and this is supporting the dollar versus (most of) its G10 peers. A stronger US dollar makes US crude oil (WTI) more expensive to the holders of foreign currencies.

But analysts/key crude oil market participants for the most part remain bullish on crude oil’s near-term prospects. According to Reuters, trading giant, Vitol Group's CEO Russell Hardy said on Tuesday that oil demand had returned to pre-pandemic levels and demand in the Q1 2022 could exceed 2019 levels. Hardy also said that any release of crude oil reserves by the Biden administration to address high energy costs would likely only have a short-term impact on the oil market.