WTI struggles around mid-$87.00s as recession woes probe OPEC forecast, supply crunch fears

• WTI remains sidelined after refreshing weekly top, before snapping three-day uptrend.
• OPEC forecasts robust energy demand during 2022, 2023 despite inflation woes.
• US inflation price triggered risk-off mood and drowned commodities.
• API stockpiles increase, focus on EIA inventories, US data for fresh impulse.

WTI crude oil traders seek clear directions around $87.50 during Wednesday’s Asian session, after reversing from the weekly high. That said, the black gold’s latest indecision could be linked to the mixed concerns over the demand-supply matrix.

Oil demand will increase by 3.1 million barrels per day (bpd) in 2022 and by 2.7 million bpd in 2023, unchanged from last month, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report, per Reuters. The news also mentioned the signs that major economies were faring better than expected despite headwinds such as surging inflation.

Also positive for the energy prices could be the headlines suggesting the US plans to rebuild its emergency oil stocks, as well as the German and the European move to cap Russian oil gas prices. Furthermore, chatters that the Western oil deal with Iran is far also adding strength to the supply crunch fears and should have favored the energy bulls.

On the contrary, US inflation data renewed fears of the Federal Reserve’s aggressive rate hike, as well as propelled the recession woes, on Tuesday. Also acting as the downside catalysts for the WTI crude oil are the fears of economic slowdown due to the concerns surrounding China and Russia.

That said, US Consumer Price Index (CPI) for August rose past 8.1% market forecasts to 8.3% YoY, versus 8.8% prior regains. The monthly figures, however, increased to 0.1%, more than -0.1% expected and 0.0% in previous readings. The core CPI, which means CPI ex Food & Energy, also crossed 6.1% consensus and 5.9% prior to print 6.3% for the said month.

It should be noted that the weekly prints of the industry inventory report from the American Petroleum Institute (API) also contributed to the commodity’s weakness. The API Weekly Crude Oil Stock increased to 6.035M during the week ended on September 09 versus 3.645M prior.

Looking forward, the black gold may remain pressured amid a firmer US dollar and the recession woes. However, the supply crunch woes can test the bears ahead of today’s official weekly inventory data from the US Energy Information Administration (EIA). Also important to watch will be Thursday’s August month US Retail Sales and Friday’s preliminary reading of the Michigan Consumer Sentiment Index for September.

Technical analysis

A clear U-turn from the 21-DMA hurdle, around $89.25 by the press time, directs oil bears towards the previous monthly low near $85.75.