WTI climbs above $77.00 on risk appetite improvement

Western Texas Intermediate (WTI), the US crude oil benchmark, rises more than 3% Wednesday, breaking above the 20-day Exponential Moving Average (EMA) at $76.55 after erasing Tuesday’s losses. A risk-on impulse, a softer US Dollar (USD), and a jump in US oil inventories are tailwinds for the black gold. At the time of writing, WTI exchanges hand at $77.30.

Traders’ mood remains optimistic, as shown by global equities rising. Estimations that December’s CPI is expected to show annual inflation cooling down to 6.5%, from 7.1% in November, maintained flows ebbing toward risk-perceived assets.

Soft inflation reading in the US would be US Dollar negative, which could boost oil’s demand as the dollar-denominated commodity would be cheaper for buyers holding other currencies.

The US Federal Reserve is expected to raise rates by 25 bps at the February meeting and again in March after a 50 basis point hike in December.

Sources quoted by Reuters said, “China could bounce back strongly, especially if backed by monetary and fiscal stimulus. Central banks may discover they have room to cut rates if inflation falls substantially and economies are in a recession.”

Oil prices rose as hopes for an improved global economic outlook and concern over the impact of sanctions on Russian crude output outweighed a higher-than-expected build in US crude and fuel stocks.

The US Energy Information Administration (EIA) reported that crude inventories rose by 19.0 M barrels last week, the third largest weekly gain ever and the most since stocks rose by a record 21.6 million barrels in February 2021.

WTI Price Analysis: Technical outlook

From a technical perspective, WTI is still neutral-to-downward biased, which, if it continued to rise further, would clash with the confluence of the 50-day EMA and a three-month-old downslope resistance trendline around $79.09. Oscillators like the Relative Strength Index (RSI) suggest that buyers are gathering momentum, but the Rate of Change (RoC), suggests the advance could be gradual as volatility levels remain depressed.

If WTI reclaims $78.00, that could open the door toward the abovementioned confluence of technical indicators, which, once cleared, will exacerbate a WTI’s rally to $80.00 per barrel. On the other hand, failure at $78.00 could keep prices lower, and open the door for sellers, to reclaim the 20-day EMA at $76.56.