- WTI challenges higher near the $42 mark.
- Vaccine optimism seems to play out around the oil market.
- USD weakness benefits oil ahead of EIA crude stocks data.
WTI (futures on NYMEX) is extending its Asian bounce in the European session, backed by a recovery in the risk sentiment and broad-based US dollar weakness.
The market mood remains somewhat buoyed by the expectations of a quicker global economic recovery once the covid vaccines roll out and life returns to normalcy in 2021. This narrative also implies a revival in the demand for oil and its products.
The safe-haven US dollar extends losses across its main peers amid a recovery in the European equities and S&P 500 futures, adding to the upside in the dollar-denominated oil.
Despite the vaccine optimism, the bulls remain cautious amid fresh restrictions and localized lockdowns announced in Australia and the US, as the world grapples with the second wave of the virus.
Also, it remains to be seen if the black gold can sustain the bounce, as a bigger-than-expected build in the US weekly crude stockpiles could remain a drag.
“The American Petroleum Institute (API) said on Tuesday that U.S. crude stockpiles rose by 4.2 million barrels last week, well above analysts’ expectations in a Reuters poll for a build of 1.7 million barrels,” per Reuters.
More so, the OPEC and its allies (OPEC+) concluded its meeting with a delay in the oil output hike by three months against expectations of an extension by six months. The outcome of the meeting could also limit the upside attempts in the WTI barrel.
Attention now turns towards the Energy Information Administration (EIA) weekly crude stocks change data due to be published later in the NA session for fresh impetus. Also, of note remains the covid developments and their impact on the broader market sentiment.
WTI technical levels
“The focus now is on Wednesday's close. Acceptance above the Doji candle's high of $41.69 would imply the period of indecision has ended with a bull victory and open the doors to $43.06 (Nov. 11 high). A violation there would expose the 2020 high of $43.78. Alternatively, a close under the Doji candle's low of $40.57 would confirm a bearish reversal and shift risk in favor of a drop to the 200-day simple moving average (SMA) located at $36.28,” FXStreet’s Analyst Omkar Godbole noted.
WTI additional levels
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