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  • WTI oil has recovered from the 49-month low of $26.25. 
  • Potential risk reset could yield a bigger corrective rally in the black gold. 

West Texas Intermediate (WTI) oil price has recovered from 49-month lows clocked in early Asia amid losses in the US stock futures. 

At press time, the black gold is trading at $27.12 per barrel, having hit a low of $26.25 early Wednesday. That was the lowest level since February 2016. 

Meanwhile, the futures tied to the S&P500, Wall Street’s benchmark equity index, are reporting a 3% drop. The stock futures are flashing red a day after printing solid gains on the back of US fiscal stimulus talks. 

If the risk-off mood persists, a notable price bounce in oil may remain elusive. That said, the odds appear stacked in favor of a risk reset, as both White House and the Fed have moved to soften the economic blow of the coronavirus pandemic. 

The Trump administration said on Tuesday that it is planning to send checks directly to Americans as part of a $1 trillion stimulus package. 

Meanwhile, the Federal Reserve said it would launch a lending facility to support short-term commercial-debt markets to alleviate the pressure in the funding markets, short term credit, as well as equities. The central bank cut rates by 100 basis points on Sunday and announced a quantitative easing program worth $700 billion per month. 

Other major central banks have cut rates recently and stand ready to do more if required. 

As a result, both stocks and oil could find bids. WTI fell by over 6% on Thursday even though the American Petroleum Institute (API) estimated a surprise crude oil inventory draw of 421,000 barrels for the week ending March 13. 

Technical levels