WTI has been drifting to the downside in an extension of the fallout from the $46 handle that blasted through $45 yesterday to 44.46 the low. Today's low has been $44.26 so far.
WTI has been suffering on a number of counts, but there has been a recovery in the dollar with the DXY up +0.58% at the time of writing at 97.50. US yields have also recovered some ground, +1.79% in the 10-years, to 2.1707% highs.
Risk took a hit yesterday around the FOMC outcome and stocks took a tumble before a recovery session in today's shift. However, WTI is weighed by US supply and shale producers who continue to produce despite the drop in prices. Oil prices tanked by nearly 4% to their lowest level since November, on the back of the U.S. Energy Information Administration data; The decrease in crude stockpiles last week was smaller than anticipated. Furthermore, its US driving season and there was an unexpected increase in gasoline stocks.
Underpinning the lower prices are recent comments from the global oil cartel and top energy watchdog International Energy Agency who noted that the global supply growth rate continues to outpace demand and will remain so until next year at least. A break of $44.20 would extend the downside with eyes to the $42 handle. To the upside, $51.50 is a key level. If DXY continues to recovery towards 98.50 and yields break the psychological 2.20% in the 10-year, that downside target in oil become achievable. Longer term, eyes will be all over US CPI readings and whether the Fed was on point this time around with its projections for further rate hikes this year.
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