WTI bulls move back in to test the recent production cut highs

WTI oil prices climbed over 2% to $81.55 a barrel on Tuesday while investors get set for data that may show further declines in US oil and fuel inventories. Additionally, a weaker US Dollar ahead of potentially cooling inflation data on Wednesday has been bullish for energy prices.

The US reports its Consumer Price Index on Wednesday and analysts at TD Securities argued that ´´core prices likely cooled off modestly in March, with the index still rising a strong 0.4% MoM.´´ Ebbing price pressures are diminishing the prospects of further Federal Reserve interest rate hikes. Markets are pricing for the Fed to cut rates by year-end on an expected recession and a softer US Dollar, as a consequence, makes oil cheaper for non-Dollar denominated investments, helping to support higher oil.  Also, tightness in global oil supplies is supporting crude prices with the continued halt of 400,000 bpd of Iraqi crude oil exports.

Looking to core fundamentals, a Wall Street Journal survey is forecasting that tomorrow's weekly Energy Information Administration report will show a 600,000-barrel decline in crude-oil stockpiles and a 1.7M-barrel fall in gasoline inventories. This would mark an eighth consecutive decline in gasoline inventories and will put crude inventories at their lowest since early February.

Meanwhile, The Energy Information Administration on Tuesday raised its price forecast for Brent crude oil by 2.5% in the agency's influential monthly Short-Term Energy Outlook following OPEC's decision earlier this month to reduce production by around 1.1 million barrels per day to support prices and lower global oil inventories. The agency raised its forecast for Brent crude, the global benchmark, to US$85.00 per barrel from its prior US$83.00 target on lower supply.

On the flip side, a bearish factor for crude was the International Monetary Fund, IMF, said that five years from now, global growth is expected to be around 3% — the lowest medium-term forecast in a World Economic Outlook for over 30 years.