WTI trims API-led losses above $41.00, nears seven-week high

• WTI’s consolidates the pullback from the highest since September 04 with its latest U-turn from $41.13.
• API Weekly Crude Oil Stock grew to 0.584M versus -5.42M prior during the week ended on October 16.
• Markets anticipate a bearish statement from the oil producers after IMF’s downbeat forecasts.
• EIA inventories, risk catalysts can entertain oil traders.

WTI refrains to extend the late-US session losses while picking up the bids around $41.30 during the pre-Tokyo open Asian trading on Wednesday. The oil benchmark rose to the highest since September 04 the previous day, before stepping back to $41.13 on downbeat inventory data from the American Petroleum Institute (API). However, broad US dollar weakness and cautious optimism in the market seem to have favored the bulls.

API inventories failed to repeat the previous week’s surprise draw of 5.42 million barrels as the industry data marked the addition of 0.584 million barrels of stockpiles in its latest release. The data offered oil traders the much-needed pullback from the multi-day high.

The pullback also gained momentum amid the International Monetary Fund’s (IMF) latest economic forecast for the Middle East and Central Asia. The Washington-based institute recently predicted a 4.1% contraction for the region following its earlier fears of -2.8% GDP. This challenges the global output cut agreement between the leading producers and Russia.

Even so, cautious optimism concerning the US coronavirus (COVID-19) stimulus and weak US dollar favors the energy bulls. Although US House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin couldn’t break the relief talk stalemate by the previously hailed deadline of Tuesday-end, the latest comments from the Congress suggest both sides are nearer to a deal. This reduces the greenback’s safe-haven demand and keeps the US dollar index (DXY) near the lowest in a month.

With the private inventories flashing downbeat numbers, the official figures from the Energy Information Administration (EIA) are also expected to recede from -3.818M previous readouts to -0.24M during the week closed on October 16. The same can offer another drag to the commodity prices, in addition to the fears of oil demand, but could be ignored if US policymakers can unveil the much-awaited stimulus.

Technical analysis

Oil prices need to stay beyond the late-September top around $41.75 to keep the bulls directed towards the August 24 low closet to $42.30, failing to do so can drag the quote back to the monthly support line near $40.70. It should, however, be noted that the 200-day EMA level of $41.30 can offer immediate support to the black gold.