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  • WTI bulls catch a breather following the heaviest run-up since mid-April.
  • S&P 500 Futures struggle to extend Wall Street gains.
  • Fed’s George, Iran headlines and challenges to Biden’s spending plans test bulls.
  • Risk-on mood, US dollar moves should be followed ahead of API stockpile data.

WTI wobbles around $66.00, down 0.10% at $65.90, during the initial Asian session trading on Tuesday. The oil benchmark jumped the most in six weeks the previous day, extending Friday’s run-up, amid upbeat market sentiment and headlines from Iran suggesting supply outage. Though recent comments from the Fed official and uncertainty over US President Joe Biden’s infrastructure spending plans seem to test the bulls.

Be it Fedsepak rejecting the reflation fears and necessity for immediate action or Iran’s downbeat signals concerning the 2015 nuclear deal, oil buyers cheered it all on Monday.

Following a weaker-than-previous US Chicago Fed National Activity Index, Fed Governor Lael Brainard rejected reflation fears and was backed by St. Louis Fed President James Bullard. However, the latest comments from Kansas City Federal Reserve President Esther George were complex as she doesn’t dismiss the fears of inflation surge, per Reuters.

While the previous comments from the Fed drowned the US Treasury yields and the US dollar index (DXY), helping the WTI, S&P 500 Futures refrain from stretching the previous day’s risk-on mood following comments from Fed’s George.

Elsewhere, Iran’s fears of a long road ahead of the nuclear deal joins the Tehran-Beijing talks to expand the oil trade, which in turn favor the oil buyers.

Furthermore, US President Joe Biden’s infrastructure and spending plan is yet to get a welcome in Capitol Hill, despite Friday’s cut in outlay, as global policymakers also criticize the tax hike plan. Uncertainty over the further stimulus offers a bumpy road to the energy bulls.

Looking forward, weekly inventory data from the American Petroleum Institute (API), prior +0.62M, will be important for WTI traders whereas the US dollar moves can offer an intermediate direction. Above all, Iran headlines and risk catalysts should be watched carefully for fresh impetus.

Technical analysis

Given the WTI’s multiple pullbacks from the $66.30-40 area since early March, bulls should be cautious. However, sellers are less likely to take risk of entries until witnessing a downside break of $63.80-70 region comprising mid-April tops.