WTI oil sideways in $85.00s post-bearish inventory data but geopolitics, supply fears keep crude underpinned

WTI trades slightly more than 50 cents lower on the session near $85.50. Crude oil markets experienced selling pressure ahead of Wednesday's futures market close at 2200GMT before gapping lower at the Thursday futures market reopen at 2300GMT as a result of bearish inventory figures. At current levels, WTI is about $2.0 below Wednesday’s highs.

API's Inventory report shoed crude oil stocks rose by 1.4M barrels last week versus consensus expectations for a 0.9M barrel decline. Gasoline stocks rose by 3.5M barrels whilst distillate stocks fell by 1.2M barrels. If official data released by the US EIA at 1530GMT confirm Wednesday’s API figures, that will be significant as it will mark the first rise in crude oil stocks in seven weeks. This could further weigh on prices and technicians would be keenly watching how WTI responds to support in the $85.00 area.

In terms of the major themes driving crude oil markets right now, amid consensus expectations for robust demand this year, supply-side themes are currently getting more attention. Chief amongst them is OPEC+’s ongoing struggles to lift output in line with recent output quota hikes. On Wednesday, the IEA said the producer group pumped 800K barrels per day less than its production target in December and the recent outage of an Iraqi-Turkish pipeline and attack on UAE infrastructure highlighted the risk of continued underproduction.

With Russia seemingly on the verge of a military incursion into Ukraine, there is uncertainty about what kind of sanctions the world’s third-largest crude oil producer might face and whether this might affect their oil exports. For now, geopolitics, supply fears, and expectations for continued robust demand will likely keep prices underpinned and analysts will likely continue to call for $100 per barrel oil this year.