WTI dives to mid-$63.00s, weekly lows ahead of EIA data/FOMC minutes

WTI crude oil extended the previous day's retracement slide from over two-month tops and witnessed some heavy selling for the second consecutive session on Wednesday. The commodity was last seen trading around mid-$63.00s, down nearly 3% for the day.

Investors remain concerned that the continuous surge in new COVID-19 cases and the imposition of new restrictive measures in some Asian countries could hinder fragile fuel demand recovery. Adding to the bearish pressure was Tuesday's report by the American Petroleum Institute (API), which showed a modest rise of 620,000 barrels in the US crude inventories.

Meanwhile, worries that rising inflationary pressure might force the Fed to raise interest rates sooner rather than later took its toll on the global risk sentiment. This was evident from a selloff in the equity markets, which was seen as another factor that collaborated to drive flows away from perceived riskier assets, including oil.

The global flight to safety, along with a goodish pickup in the US Treasury bond yields allowed the US dollar to reverse an early dip to the lowest level since January. This further acted as a headwind for dollar-denominated commodities and dragged spot prices lower ahead of the official US inventory data from the Energy Information Administration (EIA).

The report is scheduled for release during the early North American session, at 14:30 GMT, though the market focus will remain glued to the FOMC monetary policy meeting minutes. Investors will closely scrutinize the minutes for signs that there was at least some discussion on tapering QE. This will play a key role in influencing the USD price dynamics and the broader market risk sentiment in the near term.

Technical levels to watch