WTI nosedives below $74.00 on bumper weekly oil inventories and hawkish Fed minutes

West Texas Intermediate (WTI), futures on NYMEX, have been dumped by the market participants after the United States American Petroleum Institute (API) reported a huge build-up of oil inventories for the week ending February 17.

The US API reported a build-up of oil stockpiles by 9.985 million barrels. This signifies exceeding oil supply against the overall demand, which resulted in a nosedive move of around 4%.

Apart from that, hawkish Federal Open Market Committee (FOMC) minutes have bolstered further slowdown in the economic activities in the United States. Firms are still struggling to address higher interest obligations, and a further jump in the interest rates will result in more contraction in the scale of activities. Fed policymakers have favored higher rates for extended periods to bring down inflation meaningfully.

Meanwhile, St. Louis Federal Reserve (Fed) President James Bullard has advocated an aggressive interest rate hike in the March monetary policy meeting to sharpen its tools in the battle against persistent inflation. This might escalate recession fears in the United States and, eventually, the oil demand. Further, the Fed policymaker sees the terminal rate as around 5.4%.

WTI technical analysis

WTI is forming a Head and Shoulder chart pattern on a four-hour scale that indicates a breakdown of a prolonged consolidation. The right shoulder formation of the aforementioned chart pattern is under process, and a complete formation will advocate more shorts on the oil price. The neckline of the chart pattern is plotted from January 5 low at $72.64.

The Relative Strength Index (RSI) (14) has slipped into the bearish range of 20.00-40.00, which indicates that the downside momentum is active.

WTI four-hour chart