WTI claws back $111.00 on API inventory surprise draw amid Russian EU oil embargo fears

  • WTI picks up offers to reverse the pullback from the seven-week high.
  • API Weekly Crude Oil Stock recorded a surprise drop of 2.445 million for the week ended May 13.
  • Market sentiment is improving as Fedspeak backs away from the 75bps idea, firmer macros, news from China also favors buyers.
  • Updates on the European oil embargo on Russia, coronavirus and EIA stocks will be important for further guidance.

WTI takes offers to rally back to $111.00, trimming losses from a recent seven-week high as oil buyers cheer API stocks amid fears of another supply crunch , during the first Asian session on Wednesday.

That said, weekly printouts of crude oil inventory data from the American Petroleum Institute (API) for the period ended May 13 showed a depletion of 2.445 million barrels from the previous addition of 1.618 million.

In addition to the API inventories, news from Reuters that the European Commission will unveil a €210 billion plan on Wednesday on how Europe can end its dependence on Russian fossil fuels by 2027 recently favored oil buyers. “To wean countries off these fuels, Brussels will propose a three-pronged plan: a shift to importing more non-Russian gas, faster deployment of renewables, and more efforts to save energy, according to officials. draft documents viewed by Reuters,” the news said.

Elsewhere, China’s hopes of overcoming covid-induced lockdowns in Shanghai and recently stronger data in the US and eurozone, coupled with OPEC+’s failures to hit the monthly production target, are helping also buyers of WTI crude oil. Additionally, a weaker dollar offered additional strength to oil prices.

Alternatively, inflation fears and hawkish comments from major central bankers keep an eye on energy prices. On the same line is the refusal of world energy producers to reduce their production.

Next, the official weekly oil inventory data from the Energy Information Administration (EIA), expected at 1.533 million vs. 8.487 million previously, will guide oil prices in the near term. Risk catalysts are also important, including China’s covid conditions, rising rate concerns and geopolitical woes.

Technical analysis

An ascending trend line from late March around 111.40 at press time appears to be the main near-term hurdle for WTI bulls ahead of targeting a late March high near $115.85. Meanwhile, sellers will be waiting for a clear break in 10-DMA, around $106.80 at press time.