WTI recovers firmly above $75.50 despite US EIA confirms higher oil inventories
|- WTI has extended its recovery above $75.50 as Russia sets to deepen supply cuts.
- Investors have started ignoring the impact of the huge oil inventory build-up reported by the US EIA.
- Chinese government’s commitment to revive and expand consumption is also providing support to the oil price.
West Texas Intermediate (WTI), futures on NYMEX, have stretched their recovery above $75.50 in the early Tokyo session. Earlier, the oil price displayed a sheer sell-off after the United States American Petroleum Institute (API) announced a huge build-up of oil inventories for the week ending February 17.
Now, the higher build-up of oil stockpiles has been confirmed by the US Energy Information Administration (EIA) at 7.6 million barrels.
However, the oil price has ignored the oil building and has started rising as Russia is expected to deepen oil supply cuts in retaliation to sanctions from Western allies. To restrict funding for arms and ammunition in the battle against Ukraine, Western allies are continuously tightening the price cap on oil provided by Moscow in the international market. This has forced the Kremlin to deepen supply cuts, which might take off the oil price due to a supply glitch.
Russia is considering an oil supply cut at its western ports by up to 25% from March that exceeds its former 500,000 barrels oil supply cut announcement.
Apart from that, an assurance of a demand recovery from China’s commerce ministry has infused fresh blood into the oil bulls. A Chinese commerce ministry spokesperson said at a news conference on Thursday, the recovery momentum in the country’s consumer market was strong in January. He further added, “The government will take more measures to revive and expand consumption.”
Meanwhile, the rising appeal for the US Dollar could spoil the oil bulls’ party. The US Dollar Index (DXY) has shifted its business comfortably above 104.00 as the Federal Reserve (Fed) is dedicated to bringing United States inflation to normalcy by reaching the terminal rate in no time. The expectations of a continuation of policy tightening are supporting the USD Index.
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