WTI bulls poke $90.00 amid Russian pipeline halt, focus on EIA stockpiles, US/China inflation

• WTI picks up bids to reverse the pullback from weekly high.
• Energy prices struggle to please bulls as softer weekly API oil inventories battle risk-aversion wave.
• Russia’s suspension of oil supplies through Druzhba pipeline, hopes of higher demand per US oil refiners, pipeline companies favor bulls.
• Official Oil Stocks Change from EIA, US/China CPI for July will be crucial for clear directions.

WTI remains sidelined around $90.00 during Wednesday’s Asian session, after failing to impress bulls the previous day despite Russia’s another blow to European energy demand. The oil buyers should have also cheered upbeat demand forecasts from the US refiners and pipeline companies. However, fears of recession and a cautious mood ahead of the headline inflation data from China and the US seem to challenge the energy buyers of late.

That said, the weekly prints of the American Petroleum Institute’s (API) Crude Oil Stock data for the period ended on August 05 flashed an increase of 2.156 million barrels versus the previous addition of 2.165M.

On the other hand, “US oil refiners and pipeline operators expect energy consumption to be strong for the second half of 2022, even though analysts and industry watchers have worried that demand could falter if the global economy enters a recession or high fuel prices deter travelers,” said Reuters.

Also bullish for the prices could be comments from Russian pipeline monopoly Transneft that said, per Reuters, “Ukraine has suspended Russian oil pipeline flows to parts of central Europe since early this month because Western sanctions prevented it from accepting transit fees from Moscow.”

Alternatively, firmer US data and hawkish Fedspeak renewed the US dollar strength and weighed on the prices of black gold. On Tuesday, US Nonfarm Productivity improved to -4.6% during the second quarter (Q2), -4.7% expected and -7.4% prior, whereas the Unit Labor Cost increased to 10.8% from 12.7% prior and 9.5% market consensus during the said period. It’s worth noting that Fed's St. Louis president James Bullard said on Tuesday, per Reuters, that he wants rates at 4% by the end of the year. This joins recently firmer interest rate futures suggesting nearly 70% odds favoring the 75 basis points (bps) of a Fed rate hike in September.

The risk-off mood could be witnessed in Wall Street’s downbeat performance and the rebound in the US Treasury yields, which in turn weighed on the WTI crude oil prices.

Moving on, China’s Consumer Price Index (CPI) and Producer Price Index (PPI) data for July will offer immediate directions but major attention will be given to the US CPI, expected to ease to 8.7% from 9.1% on YoY, as well as the CPI ex Food & Energy which is likely to rise from 5.9% to 6.1%. Following that, the official weekly oil inventory data from the Energy Information Administration (EIA) for the week ended on August 05, expected -0.4M versus 4.467M, will be important to watch for the oil prices forecast.

Technical analysis

Although a sustained break of the weekly resistance line, now support around $87.45, keeps WTI crude oil buyers hopeful, Tuesday’s Doji candlestick teases bears until the quote stays below the $92.00 immediate hurdle.