WTI heads back towards $42 ahead of EIA, FOMC

• Oil cheers bullish API crude supply report, USD selling.
• US coronavirus surge-led demand concerns overlooked.
• Next of relevance remains the EIA data and FOMC.

WTI (futures on Nymex) caught a fresh bid-wave in the European session and jumped back above 41.50, following a downside consolidative mode seen earlier in the Asian trades.

At the time of writing, the US rises 1.17% to 41.52, with eyes set on the 42 figure amid a slightly better risk tone and ongoing weakness in the US dollar across its main peers.

The dollar is downed by the expectations that the Fed may strike a dovish stance amid faltering US economic recovery and the coronavirus resurgence. A weaker greenback makes the USD-denominated oil cheaper for foreign buyers.

Further, the bullish US crude inventories report, published by the American Petroleum Institute (API) late Tuesday, also collaborates with the upbeat momentum in the barrel of WTI.

The API data showed that the US crude stockpiles fell by 6.8 million barrels last week to 531 million barrels vs. expectations of an increase of 357,000 barrels.

Meanwhile, oil bulls ignore the looming concerns over the fuel demand recovery, as soaring virus cases in the US and worldwide imply that the global travel restrictions are here to stay.

In addition, the US-China tensions also take a back seat, as the focus remains on the all-important FOMC decision, which could have a significant influence on the dollar trades, eventually impacting the USD-sensitive, WTI.

WTI technical levels to watch

“Should oil prices decline below $40.55 on a daily chart, $40.00 may offer an intermediate halt during the fall towards the month’s low near $38.70. On the contrary, an upside clearance of 200-day EMA level of $41.73 will not only need a sustained break above $42.00 but should also break the monthly peak of $42.52 to aim for February month’s low near $44.00,” explains Anil Panchal, FXStreet’s Analyst.

WTI additional levels