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  • WTI keeps the bounce off $41.70 following initial downtick amid weaker than prior inventory levels.
  • US API Weekly Crude Oil Stock dropped -4.4M versus -8.587M prior.
  • US-China tussle, uncertainty over American stimulus weigh on the commodities with rising US dollar exerting additional downside pressure.
  • EIA data will be in the spotlight for the day.

WTI rises to $41.90 during the early Wednesday morning in Asia. The energy benchmark seems to pick-up bids after the pullback moves from $41.70. The reason defies the receding inventory draw conveyed by the American Petroleum Institute’s (API) weekly stockpile update.

API Weekly Crude Oil Stock eased the previous declines in inventories while flashing a draw of -4.4M during the week ending on August 07. Traders will wait for the official figures from the Energy Information Administration (EIA), up for publishing today at 14:30 GMT, for a clearer view.

While closing below $42.00, the black gold reversed Monday’s upbeat performance with three negative days in the previous four. Although the stockpile data weighed on the commodity, its initial fall could be traced to the broad US dollar strength and risk catalysts suggesting weakness in future demand.

The US dollar index (DXY) marked a three-day winning streak while closing near 91.64 by the end of Tuesday. The greenback’s bounce from the two-year low could be attributed to US President Donald Trump’s executive orders that rekindled hopes of further stimulus. However, the same expectations fade off-late as Fox Business News (FBN) said that White House coronavirus aid negotiators have not spoken to top democrats in congress today (Tuesday).

Other than the stimulus talks, the coronavirus (COVID-19) woes and the US-China tussle also weigh on the energy benchmark. After the US sanctioned China’s 11 diplomats, Beijing retaliated with the same measures. Following the move, US President Donald Trump said the phase one deal means “very little” to him. Adding to the jitters were headlines from the South China Morning Post (SCMP) suggesting that goods made in Hong Kong will be termed as “Made in China”.

Amid all these catalysts, US 10-year Treasury yields managed to regain 0.65% mark even if Wall Street closed in negative.

Moving on, the EIA Crude Oil Stocks Change, expected -3.2M versus -7.373M prior, can offer immediate direction to energy prices. However, major attention will be given to the risk catalysts and the US dollar moves.

Technical analysis

Unless breaking 21-day SMA level around $41.40, sellers are less likely to enter. Though, buyers will also stay cautious until the quote breaks weekly resistance line, at $43.00 now.