WTI bounces higher, trades at the $106.50 zone despite disappointing macro data

• Oil prices are currently trading higher, although it has been a rocky day so far.
• WTI has risen back to $106.50 from previous lows of $102.50.
• Traders are weighing geopolitical tensions against a bearish macro backdrop.

oil prices are currently trading higher, although it has been a choppy day so far. Previous month WTI futures fell as low as $102.50 earlier in the day, but have since traded modestly higher again at $106.50. Risk appetite remains strong at the start of the US trading session, with US equities testing multi-month lows, international stock markets also suffering and bond yields falling sharply. mid-flight to safety.

Traders continue to cite fears over global growth slowing yet, sky-high inflation (see this week’s consumer and producer price inflation reports) and central bank tightening, all of which come against the backdrop of war Russian-Ukrainian and ongoing expansion of lockdowns in China, as a weigh on sentiment. This was clearly weighing on oil prices earlier in the day.

Comments from major players in the oil market have also been bearish. Both OPEC and the International Energy Agency (EIA) released their monthly oil market reports on Thursday. The former cut its global oil demand growth forecast for this year for the second consecutive month due to the impact of the Russo-Ukrainian war, demand destruction as a result of inflation and closures in China.

The IEA’s message was similar. “Rising pump prices and slowing economic growth are expected to significantly slow demand recovery for the rest of the year and into 2023,” they said. “Prolonged lockdowns in China…are causing a significant slowdown in the world’s second largest oil consumer.” The agency also revised down its expectations for demand growth this year.

But much attention has also been paid to worsening relations between Russia and the EU as Finland and Sweden move closer to joining NATO and Germany accuses Russia of “weaponizing” its energy exports. This keeps fears in the spotlight over the impact on Russia’s oil production of Western sanctions on Russia over its invasion of Ukraine. The EU is expected to agree soon on a plan to end Russian oil imports, in what analysts have said would be a devastating blow to Russia’s energy industry.

Meanwhile, a French diplomatic source was recently quoted by Reuters as pessimistic that the US and Iran will quickly resolve their differences and return to the 2015 nuclear deal. A return to the old deal would mean lifting US sanctions against Iran. and up to 1.3 million barrels a day in Iranian exports that would return to global markets, commodity strategists have said.

The combination of these last two themes seems to have been enough to entice buyers back into the WTI markets as its price approaches $100. But in such a bearish macro context, it remains to be seen if WTI can continue its recovery and test previous weekly highs above $110/bbl.

Technical levels