WTI fades US inflation-led rally below $91.00, focus on OPEC, IEA demand forecasts

• WTI crude oil struggles to keep the US inflation-linked bullish bias.
• Resumption of Russian oil pipeline flows after six-day halt challenges US CPI-led advances.
• EIA inventory build, Fedspeak and challenges to risk profile also exert downside pressure on the oil prices.
• Monthly demand forecasts from OPEC, IEA will be important for immediate direction.

WTI crude oil prices struggle to keep US inflation-led gains during Thursday’s Asian session, staying mostly idle around $90.85 after stepping back from $91.79. That said, challenges to risk profile join a cautious mood ahead of monthly demand forecasts from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA).

The black gold cheered the US dollar’s slump the previous day to post over 1.0% gains amid receding hawkish Fed bets. Though, the latest comments from Fed policymakers and the US-China tariff story challenged the bulls afterward. Additionally, headlines suggesting Russian oil pipeline flows resumed after Hungarian firm settled transit bill joined downbeat weekly official inventory data from the US Energy Information Administration (EIA) to also exert downside pressure on the energy benchmark.

“Russian oil pipeline flows resumed to Central Europe on Wednesday, ending a six-day halt, after Hungarian group MOL paid transit fees owed to Ukraine, providing a temporary solution to the latest disruption of Russian energy supplies,” said Reuters. On the other hand, the
EIA Crude Oil Stocks Change rose to 5.458M for the week ended on August 05 versus 0.073M forecasts and 4.467M prior.

US Dollar Index (DXY) dropped to the fresh low since June 30 after the US Consumer Price Index (CPI) declined to 8.5% on YoY in July versus 8.7% expected and 9.1% prior. “After Wednesday's CPI report, traders of futures tied to the Fed's benchmark interest rate pared bets on a third straight 75-basis-point hike at its Sept. 20-21 policy meeting, and now see a half-point increase as the more likely option,” said Reuters following the data.

It’s worth noting that US President Joe Biden also mentioned that they are seeing some signs that inflation may be moderating, as reported by Reuters. "We could face additional headwinds in the months ahead," Biden added. "We still have work to do but we're on track," added US President Biden.

Furthermore, Minneapolis Fed President Neel Kashkari mentioned, “The Fed is ‘far, far away from declaring victory’ on inflation. The policymaker also added that he hasn't ‘seen anything that changes’ the need to raise the Fed's policy rate to 3.9% by year-end and to 4.4% by the end of 2023. Elsewhere, Chicago Fed President Charles Evans mentioned, “The economy is almost surely a little more fragile, but would take something adverse to trigger a recession.” Fed’s Evans also called inflation "unacceptably" high.

Also challenging the oil buyers was Reuters news saying US President Biden rethinks steps on China tariffs in wake of Taiwan response, per sources.

Looking forward, the OPEC and IEA demand projections will be important after the EIA raised its 2022 oil consumption forecasts to 99.43 million bpd. OPEC left 2022 world oil demand growth forecast unchanged at 3.36 million bpd in its latest projections while EIA warned that global natural gas demand growth is likely to contract slightly in 2022 and will continue its sluggish trend over the next three years.

Technical analysis

Despite the latest rebound, WTI crude oil prices remain below the 200-DMA hurdle surrounding $94.40, which in turn joins sluggish RSI and MACD to keep sellers hopeful of revisiting the six-month low marked in the last week, around $86.40.