WTI edges higher to near $78.50 due to drawdown in US inventories, Canada wildfires

West Texas Intermediate (WTI) crude Oil price retraces its recent losses, trading around $78.30 per barrel during Wednesday's Asian session. The advance of the crude Oil prices could be attributed to the latest crude Oil supply update from the American Petroleum Institute (API) released on Tuesday.

API's Weekly Statistical Bulletin (WSB) provides comprehensive data on refinery operations and the production of major petroleum products in the United States (US) and its regions. For the week ending May 10, the API Weekly Crude Oil Stock dropped 3.104 million barrels, significantly exceeding the forecasted 1.35 million-barrel decline. This sharp decrease completely offset the previous week's gain of 0.509 million barrels.

In Canada, concerns have arisen due to wildfires in remote western regions. Of particular worry is a large wildfire nearing Fort McMurray, which serves as the central hub for Canada's Oil sands industry, contributing approximately 3.3 million barrels per day, equivalent to two-thirds of the nation's total output.

However, crude Oil prices lost ground due to higher-than-anticipated US producer prices in April, sparking concerns about the Federal Reserve (Fed) potentially maintaining elevated interest rates for an extended period. These higher interest rates can dampen economic activities in the United States, the world's largest oil consumer, affecting Oil demand.

The US Bureau of Labor Statistics (BLS) reported that the Producer Price Index (PPI) increased by 0.5% month-over-month in April, surpassing the forecast of 0.3% and rebounding from March's contraction of -0.1%. While the Core PPI, which excludes volatile food and energy prices, also surged by 0.5% MoM, exceeding projections of 0.2%.

Additionally, the recent report of OPEC+ (the Organization of the Petroleum Exporting Countries and its allies, led by Russia) showed that member nations surpassed their agreed-upon limit by producing an extra 568,000 barrels per day (bpd) last month. Nevertheless, OPEC maintained an optimistic outlook on global Oil demand, forecasting an increase of 2.25 million barrels per day in 2024 and 1.85 million barrels per day in 2025.