- WTI bounces off $37.92 after snapping five-day losing streak the previous day.
- Positive market sentiment ignores EIA’s downbeat demand forecast.
- Official inventory data can follow the private stockpile report and recall the bears.
WTI picks up the bids near $38.20 during the pre-Tokyo trading on Thursday. The energy benchmark bounced off the lowest since June 15 on Wednesday after the market’s risk-on mood dragged the US dollar index from one-month high. In doing so, the quote ignores downbeat demand forecasts from the Energy Information Administration (EIA) and weekly inventory data from the American Petroleum Institute (API).
USD moves matter the most…
The EIA lowered its global oil demand for 2020 by 210,000 barrels per day (bpd) to 8.32 million bpd while the API Weekly Crude Oil Stock, for the period ended on Sep 4, rose 2.97 million barrels from -6.36 million barrels of prior. While the updates offered the black gold’s pullback from $38.68, the quote managed to close Wednesday on the positive side for the first time since September 01.
The reason could be traced from the US dollar’s weakness and the market’s risk-on sentiment. The US dollar index (DXY) snapped the six-day winning streak the previous day while the market mood turned positive amid talks that the European Central Bank (ECB) policymakers are more positive than anticipated and TikTok parent Bytedance talks to the US for help. Additionally, China’s inflation numbers and the US JOLTS Job Openings were some extra reasons for the commodity mark the notable bounce.
Earlier, the oil prices bear the burden of a flare-up in US-China tensions and scaling back of the OPEC+ output cut. Also recently exerting downside pressure were the price cuts by Saudi Arabia and Abu Dhabi.
Moving on, risk catalysts can offer intermediate direction to the commodity ahead of the weekly EIA Crude Oil Stocks Change, forecast -1.075M versus -9.362M prior.
It's worth mentioning that the UBS turned positive on the oil prices in its overnight report while saying, "A combination of factors-a risk-off environment, a stronger US dollar, concerns about stalling oil demand-has pushed Brent prices to a two-month low. We still see oil demand moving higher from here over the coming months. Also, OPEC+ compliance is higher than we thought, and at current prices we don't expect US crude production to grow. With the oil market staying undersupplied, we reiterate our positive price outlook."
Technical analysis
Considering the quote’s sustained bounce off a 100-day SMA level of $36.95, coupled with mostly oversold RSI conditions, WTI is expected to direct the recovery moves toward the July month low near $38.75 and $40.00 round-figures.
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