WTI extends comeback above $85.00 as EIA oil inventories decline by 1.75 million barrels

Futures for West Texas Intermediate (WTI) on the New York Mercantile Exchange (NYMEX) increased after the Energy Information Administration (EIA) announced a decline in crude oil inventories on Wednesday. In the early European session, oil prices have extended their gains above the key resistance level of $85.00 to approximately $85.57.

Wednesday, the EIA reported a decrease in oil inventories of 1.75 million barrels, compared to estimates for an increase of 1.38 million and the previous release of 9.88 million. US Vice President Joe Biden's oil release announcement was met with skepticism, but an unexpected fall in oil reserves has instilled optimism in black gold. US Vice President Joe Biden announced the release of 15 million barrels from the Strategic Petroleum Reserve (SPR) in an effort to stabilize the demand-supply mechanism.

The anticipation of additional sanctions on the oil supply from Russia, which may cripple the global oil supply, also contributes to the optimism surrounding oil prices.

On a broader scale, oil price headwinds are far from finished. Black gold may experience pessimism if the People's Bank of China (PBOC) maintains its current monetary policies. Despite the economic upheaval caused by the continuation of the zero-Covid-19 policy and the weakening real estate market, the PBOC maintained its Prime Lending Rates (PLR). A lack of additional monetary policy could affect the sentiment of market players.

As the risk aversion trend has faded, the US dollar index (DXY) has fallen substantially and reached an intraday low of 112.77. S&P500 futures have regained all of their overnight losses as a result of a resurgence in the risk-on market sentiment. US 10-year Treasury yields continue to be solid.