WTI clings to gains near mid-$48.00s, lacks follow-through

• WTI crude oil gained traction for the second consecutive session on Wednesday.
• The uptick was supported by data showing a larger fall in US crude oil inventories.
• Hopes for a recovery in the fuel demand remained supportive of the positive move.

WTI crude oil held on to its intraday gains and was last seen hovering near the top end of its daily trading range, around the $48.40-50 region.

A combination of supporting factors assisted spot prices to build on the previous day’s positive move and gain some follow-through traction for the second consecutive session on Wednesday. Oil prices remained supported by Tuesday’s data from the American Petroleum Institute (API), which showed a bigger-than-expected decline in US crude oil inventories.

Apart from this, optimism about the likelihood of additional financial aid package and a strong global economic recovery in 2021 boosted hopes for a recovery in the fuel demand. This, along with a broad-based US dollar weakness, provided an additional boost to dollar-denominated commodities and remained supportive of the intraday uptick for crude oil prices.

In fact, the key USD Index weakened further below the 90.00 psychological mark and slumped to fresh multi-year lows amid the prevalent upbeat market mood. The already stronger global risk sentiment got an additional boost after UK regulators approved the use of the AstraZeneca/Oxford coronavirus vaccine, lessening demand for the safe-haven USD.

Despite the supporting factors, the positive move lacked any strong bullish conviction amid relatively thin trading conditions on the back of year-end holiday season. This, in turn, warrants some caution for bullish traders and makes it prudent to wait for some follow-through buying before positioning for any further near-term appreciating move.

Technical levels to watch