WTI off lows, hovers around $40 ahead of OPEC+ meeting

WTI’s (futures on Nymex) retreat from two-week highs of $40.34 stalled just below $39.50, allowing a tepid bounce back around the $40 mark.

Despite the pullback, the US oil remains under mild bearish pressure, as traders remain nervous ahead of the critical OPEC and its allies (OPEC+) meeting to discuss the market fundamentals and output cuts policy.

The black gold dropped on reports that the OPEC is unlikely to talk about a need for deeper oil cuts while the cartel’s no.1 producer, Saudi Arabia, plans to keep its production steady.

Further, Reuters reported that the OPEC+ are worried that the Increase in COVID-19 cases may weigh on economic recovery and oil demand. This news continued to undermine the prices.

The bigger-than-expected rise in US distillate stockpiles reinforced oil demand concerns also remained a drag on the prices. The latest data published by the Energy Information Administration (EIA) showed that the US distillate stockpiles rose by 3.5 million barrels last week

However, the downside remains cushioned amid broad-based US dollar weakness, as the greenback almost reversed the Fed inspired rally. A weaker greenback makes the USD denominated oil cheaper in foreign currencies.

On Wednesday, the WTI barrel rallied to the highest levels in two weeks above $40 amid alerts on Hurricane Sally and favorable technical set up. All eyes now remain on the OPEC+ outcome for the next direction in prices.

WTI technical levels to watch

“The bulls will now need to overcome structure at the 3rd Sep lows overhead at $40.20/80 which meets a 61.8% Fib of the same daily bearish impulse. Failures between here and there will give rise to the downside prospects. The start of a new wave to the downside towards weekly and monthly demand zones in the $34 area will offer an opportunity to short,” FXStreet’s Analyst Ross Burland explained.

WTI additional levels