- WTI stops declining below four week low after a surprise decline in API stockpiles.
- Receding geopolitical risks, fears of global slowdown exert downside pressure.
- EIA inventory report, trade/political headlines in the spotlight for now.
Having dropped to the lowest since early September, WTI stops further declines as it seesaws near $54.20 during the Asian session on Wednesday.
The energy benchmark previously weakened as activity numbers from leading global economies raised questions for future demand. Also adding to the downside is receding geopolitical fears concerning the Middle East.
Latest headlines from the Aljazeera quote speaker of the Iranian Parliament while showing Tehran’s readiness to have a dialogue with Saudi Arabia.
Even so, surprise draw in the weekly oil stocks report by the American Petroleum Institute (API), to -5.92M from +1.40M prior, seems to grab markets’ attention amid China’s holidays. The surprise draw in private inventory levels questions market perception towards the macro impact of Saudi Aramco’s return to normal production. It should also be noted that the US Energy Information Administration (EIA), on Monday, reported that the US Crude oil output fell 276,000 barrels per day (bpd) in July to 11.81 million bpd.
Oil traders will now keep an eye over the EIA’s weekly US crude oil stocks change data while also following trade/political headlines for further direction.
Technical Analysis
FXStreet Analyst Ross J. Burland spots break of near-term support trend-line, coupled with sustained trading below key moving averages, to portray WTI weakness:
“Trendline support was broken as were the accumulation of 200,50 and 20 Daily moving averages. Bears have moved further to test the vicinity of the 78.6% Fibonacci level (a reenactment target of the August rally) in the mid 53 handle and have eyes for a full retracement back to the year’s lows around 50.50. On a move higher, for the reversal and trend to be convincing, bulls will need to get back above the 21-DMA to open prospects for the 59 handle that will then bring in the April highs at 66.58 on the wide as a target. “
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