WTI bulls move in at key support and eye the Fed

West Texas Intermediate is up 0.11% on the day and has traded between $82.11 and $86.21bbls so far. The black gold was reversing early offers that lead to the lows even as the US dollar bulls moved in as markets remain in anticipation of the Federal Reserve and a slew of other central banks that meet this week.

Fed funds futures have priced in a 79% chance of a 75-basis-point rate hike this week and a 21% probability of a 100-basis-point increase at the conclusion of the Fed committee's two-day policy meeting.  However, some observers argue that the central bank could move to raise rates by a full percentage point after August inflation ran hotter than expected. With the combination of the worries, major economies will tip into recession, oil could see less demand at the same time the US dollar picks up a safe haven bid that is already close to its 20-year high as per the DXY index. 

Nevertheless, China lifted a two-week lockdown on the 21-million citizens of Chengdu, returning normal activity to the Sichuan capital, which could be a contributing factor to the rise in oil prices at the start of the week. On the other hand, there was also news that the US will sell 10 million bbls of oil from its strategic reserve for delivery in November, the Department of Energy said on Monday.

''Markets are increasingly skeptical about the prospects for an immediate resolution on the Iran file as well, which translates into a resurgence in energy supply risks despite the ongoing slump in prices. As markets reprice supply risk premia, the lack of liquidity could also exacerbate upside volatility in crude,'' analysts at TD Securities said.