- WTI is moving higher and is approaching the $ 42 level.
- Optimism about vaccines seems to be present in the oil market.
- USD weakness benefits oil prices ahead of EIA crude stock data.
The WTI (NYMEX futures) is extending its bounce during the European session on Wednesday, supported by a recovery in risk appetite sentiment and widespread US dollar weakness.
Market sentiment remains somewhat buoyed by the expectations of a faster global economic recovery once the covid vaccines roll out and life returns to normal in 2021. This narrative too implies a reactivation of oil demand and its products.
Safe-haven US dollar spreads losses versus major currencies amid a rally in European stock markets and S&P 500 futures. The USD pullback benefits oil prices, denominated in dollars.
Despite the optimism about the vaccine, WTI bulls remain cautious amid new restrictions and localized closings announced in Australia and US., as the world grapples with the second wave of the coronavirus.
Also, it remains to be seen whether black gold can sustain the rebound, as a larger-than-expected build-up in US weekly crude reserves could remain a drag.
“The American Petroleum Institute (API) said Tuesday that US crude reserves increased by 4.2 million barrels last week, well above analysts’ expectations in a Reuters poll of an accumulation of 1.7 million barrels, “Reuters reports.
Furthermore, the OPEC and its allies (OPEC +) concluded their meeting only three months late in increasing oil production, compared to expectations of a six-month extension.. The outcome of the meeting could also limit upward attempts at WTI prices.
The focus is now on the weekly crude oil stock change data from the Energy Information Administration (EIA) to be released later in the US session to give fresh momentum. Furthermore, the focus will also be on developments around the coronavirus and its impact on overall market sentiment.
WTI technical levels
“The focus now is on Wednesday’s close. Acceptance above the Doji candle high of $ 41.69 would imply that the period of indecision has ended with a bullish win and would open the doors at $ 43.06 (November 11 high). A breakout of that level would expose the 2020 high of $ 43.78. On the other hand, a close below the low of the Doji candle at $ 40.57 would confirm a bearish turn and shift the risk in favor of a fall to the 200-day SMA at $ 36.28, “notes FXStreet analyst Omkar Godbole .
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