WTI drops to test key $40.35 support on unexpected EIA oil stocks build
|- WTI reverses spike to 40.85 on bearish EIA report.
- Risk-on mood limits the downside in the US oil.
- Bull-bear tug-of-war extends into the NY trading.
WTI (August futures on Nymex) saw a quick drop to the 40.40 region in a matter of minutes following an unexpected build in the US crude stockpiles, per the latest Energy Information Administration (EIA) weekly data.
The US crude inventories rose by 5.7 million barrels in the week to July 3, compared with expectations for a decrease of 3.1 million barrels.
The bulls, however, quickly regained control and lifted the US oil back onto the 40.50 level, now trading flat at 40.70. Despite the volatility, the black gold remains within the familiar trading range below the 41 handle.
The downside remains cushioned in the barrel of WTI, courtesy of the risk-on rally in the US equities, which buoys the sentiment around the higher-yielding oil. The S&P 500 index is off the highs but trades will bid around 3,150.
Meanwhile, the rebound in WTI remains capped, in the face of the continued rise in coronavirus cases in the US states, which keeps the market cautious. Further, the optimism of tighter supplies globally fades on the bearish US crude inventory report, weighing negatively on the prices.
Looking ahead, the incoming virus updates and the sentiment on Wall Street will likely remain the main driver for the oil-price action.
WTI technical levels to watch
From a near-term technical perspective, the bulls and bears remain in a wait and see mode, as the price clings to the 40.50 level, which is the confluence of the 21 and 50-hourly Simple Moving Averages (HMA). The falling trendline resistance at 40.88 is the level to beat for the bulls, as they look to regain the momentum above the 41 handle. The bullish bias will remain intact as long as the commodity holds above the horizontal 100-HMA and rising trendline support at 40.35.
WTI additional levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.