WTI retreats toward $101 as diplomatic efforts offset bullish inventory data

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WTI approaches critical support despite inventories

Middle East diplomacy reduces the geopolitical risk premium

The main reason for the decline has been a shift in expectations regarding the situation in the Middle East: renewed diplomatic initiatives have reduced the geopolitical risk premium that the market had previously priced into oil due to the threat of supply disruptions. Meanwhile, U.S. WTI futures also came under pressure today, falling approximately 1.5% to $101.27 during the first half of the European session.

Crude inventories decline as gasoline stocks rise

The key event of the past 24 hours was the release of the weekly EIA report, which showed another decline in U.S. crude oil inventories. For the week ending October 23, commercial inventories fell by 1.89 million barrels to 410.6 million barrels, while analysts had expected virtually no change.

Thus, inventories have declined for the fourth consecutive week, with total stocks approximately 4% below the five-year average. Particularly significant was the 624,000-barrel decline in inventories at the major Cushing storage hub, to 26.97 million barrels, indicating continued tightness in the physical balance of the U.S. oil market.

At the same time, distillate inventories decreased by 1.46 million barrels to 102.8 million barrels, remaining approximately 10% below the seasonal average. However, the report also contained negative signals for oil prices: gasoline inventories unexpectedly increased by 3.87 million barrels to 209.2 million barrels, compared with forecasts for a decline of nearly 1 million barrels.

Gasoline demand fell to 8.36 million barrels per day, while refinery utilization declined to 92.8%. This divergence between falling crude inventories and rising gasoline stocks increased concerns about the sustainability of petroleum product demand, limiting the positive impact of the overall decline in inventories.

U.S. production recovery puts $101 support at risk

Another factor behind the pressure was the recovery in U.S. oil production following earlier disruptions caused by adverse weather conditions. According to the EIA, U.S. crude oil production increased by approximately 723,000 barrels per day, once again approaching 14 million barrels per day. Meanwhile, crude oil exports rose by around 1.4 million barrels per day to 4.85 million, partly explaining the substantial decline in domestic commercial inventories.

However, Kpler analysts point to discrepancies between official export statistics and actual shipment volumes tracked through tanker movements. This has prompted market participants to interpret the latest report with greater caution.

Nevertheless, after breaking through several support levels, WTI prices have approached support around $101, where buying interest may still persist. However, the return to this support, as I warned in WTI approaches key $105 resistance as supply threats sustain bullish momentum, increases the risk of a break below it and a decline toward the psychological $100 level.

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