WTI struggles above $81.00 despite huge US Oil inventory draw, fears from Idalia, Saola

WTI crude oil lacks clear directions while making rounds to $81.30–40 heading into Thursday’s European session, snapping a two-day winning streak with mild losses. In doing so, the black gold portrays the market’s cautious mood ahead of the key US inflation and employment clues while ignoring the heavy inventory draw and supply-crunch fears emanating from Hurricane Idalia.

The weekly measure of the US crude oil inventories per the official source the Energy Information Administration (EIA) marked the biggest draw in four weeks after the industry source American Petroleum Institute (API) marked the largest fall since September 2016.

Elsewhere, fears of witnessing a supply crunch and higher energy demand due to Hurricane Idalia in the US and Typhoon Saola in China, also keep the WTI crude oil buyers hopeful. “Hurricane Idalia plowed into Florida's Gulf Coast on Wednesday with howling winds, torrential rains and pounding surf, then weakened as it turned its fury on southeastern Georgia, where floodwaters trapped some residents in their homes,” reported Reuters.

On the other hand, China issued the highest typhoon warning on Thursday, per Reuters, as Typhoon Saola reached the southeastern coastline while challenging Hong Kong and other major manufacturing hubs in the neighboring Guangdong province.

While talking about the mood, the S&P 500 Futures struggle to track Wall Street’s gains amid a cautious mood ahead of the key US data. However, the benchmark US 10-year Treasury bond yields remain pressured at the lowest levels in three weeks, around 4.11% by the press time.

It should be noted that the black gold previously cheered the downbeat US Dollar and hopes of a sooner ending of the hawkish cycle at the major central banks including the Federal Reserve. However, the early-day mixed China data prod the Oil buyers ahead of the top-tier US statistics. That said, China’s official NBS Manufacturing PMI for August rose to 49.7 versus 49.4 expected and 49.3 previous readings whereas the Non-Manufacturing PMI came in as 51.0 compared to 51.5 prior and market forecasts of 51.1.

Looking ahead, the Fed’s preferred inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index for August, expected to remain unchanged at 0.2% MoM but edge higher to 4.2% YoY from 4.1% prior, will be important for clear directions. Also, headlines about China and the natural calamities due to Idalia and Saola, as well as weather conditions in Europe, will offer a clear guide for the Oil traders.

Technical analysis

Despite the latest hesitance, the WTI crude oil buyers remain hopeful unless the quote stays beyond the 21-DMA level of around $80.90.