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WTI advances firmly towards $96.50, pending the API report and the Fed meeting

  • Benchmark US oil breaks three consecutive days of losses and rises despite US data showing the US economy is slowing.
  • A US recession and subsequent Covid-19 shutdown in China could weigh heavily on the price of WTI.
  • Libya is set to increase its oil output from 860,000 to 1.2 million bpd amid political turmoil.

Western Texas Intermediate (WTI) rises 1.40% on Monday as US stocks gain, reflecting an upbeat market mood, despite weaker-than-expected US economic data painting a gloomy picture for the economy, reigniting recession fears. At the time of writing, WTI is trading at $96.65 per barrel.

Investor sentiment is positive, despite dismal US economic data portending a recession

The mood remains positive as investors await earnings reports from US companies. The Chicago Fed’s national activity index contracted for the second month in a row. At the same time, the Dallas Fed manufacturing index also tumbled, indicating that the US economy is in worse shape than estimated. Consequently, as the dollar index shows, the greenback weakened, falling 0.09%, which was a tailwind for WTI.

Fundamentally, the narrative has not changed. Energy prices remain high, a US recession looms, and the conflict between Ukraine and Russia drags on for five months. Monday’s US data raised traders’ concerns about a recession and could reduce fuel demand, a headwind for WTI prices.

In addition to US factors, China’s zero tolerance (Covid-19) restrictions have taken a toll on oil prices. The second-largest economy narrowly escaped a contraction in the second quarter and grew 0.4% year-on-year.

Meanwhile, financial analysts remain skeptical about Libya’s output as the country grapples with political uncertainty. However, the Libyan National Oil Corporation said it would like to recover 1.2 million bpd in two weeks, from 860,000. This, together with the imposition by EU countries of a cap on Russian oil, would keep black gold prices volatile in the coming week.

What to watch out for

In the week ahead, the US economic docket will include the API Oil Stock Change for July 22, with the previous reading at 1.86 million. On Wednesday, the EIA will release gasoline and crude oil inventories along with the US Federal Reserve’s monetary policy decision.

WTI Key Technical Levels

WTI US OIL

Panorama
Last Price Today 95.82
Today’s Daily Change 1.19
Today’s Daily Change % 1.26
Today’s Daily Opening 94.63
Trends
20 Daily SMA 100.48
50 Daily SMA 107.79
100 Daily SMA 105.96
200 Daily SMA 93.66
levels
Previous Daily High 97.36
Previous Daily Minimum 93.71
Previous Maximum Weekly 100.69
Previous Weekly Minimum 92.77
Monthly Prior Maximum 121.36
Previous Monthly Minimum 101.17
Daily Fibonacci 38.2% 95.1
Daily Fibonacci 61.8% 95.97
Daily Pivot Point S1 93.11
Daily Pivot Point S2 91.58
Daily Pivot Point S3 89.45
Daily Pivot Point R1 96.76
Daily Pivot Point R2 98.89
Daily Pivot Point R3 100.42

Source: Fx Street

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