- WTI remained under heavy selling pressure for the second straight session on Wednesday.
- COVID-19 jitters, risk aversion, and a stronger USD contributed to the intraday selling bias.
- Investors are now looking forward to the EIA report to give a boost ahead of the key FOMC Minutes.
Crude oil WTI extended the previous day’s retracement slide from more than two-month highs and witnessed some strong selling for the second straight session on Wednesday. The commodity last traded at $ 63.50, losing 3% on the day.
Investors remain concerned that the continued rise in new COVID-19 cases and the imposition of new restrictive measures in some Asian countries could hamper the fragile recovery in fuel demand. Added to the downward pressure was Tuesday’s report from the American Petroleum Institute (API), which showed a modest 620,000-barrel rise in US crude inventories.
Meanwhile, concerns that mounting inflationary pressure could force the Fed to raise interest rates sooner rather than later took its toll on global risk sentiment. This was evident from a sell-off in the equity markets, which was seen as another factor helping to shift flows away from perceived riskier assets, including oil.
The global flight to safety, coupled with a good recovery in US Treasury yields, allowed the US dollar to reverse an initial slide to the lowest level since January. This also acted as a headwind for dollar-denominated commodities and dragged spot prices lower ahead of official US inventory data from the Energy Information Administration (EIA).
The report is scheduled to be released early in the US session at 14:30 GMT, although the market focus will remain glued to the minutes of the FOMC monetary policy meeting. Investors will closely scrutinize the minutes for signs that there was at least some discussion about phasing out QE. This will play a key role in influencing USD price dynamics and overall market risk sentiment in the short term.
Technical levels
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