WTI consolidates as traders balance supply and demand risks

US West Texas Intermediate (WTI) was around 0.6% down into the closing bell on Wall Street as investors fret around the risks in the new global wave of the coronavirus Delta variant to energy demand.

At the time of writing, WTI is trading at $71.75 and had travelled between a high of $72.30 and $71.10 into early Asian trade. 

Even though supplies are tightening and vaccination rates rising, oil cannot shake off the prospects of fresh economic shutdowns and the negative ramifications for the energy complex. 

In Europe, where the spread is feard to be the worst of all, Britain reported its highest number of deaths and people in hospital with coronavirus since March.

The virus is still present in almost every part of the world, but the focus has slowly shifted from Asia to Europe and then America.

In repose to the European spread, the United States issued travel warnings to Spain and Portugal.

Meanwhile, the International Monetary Fund on Tuesday maintained its 6% global growth forecast for 2021, upgrading its outlook for the United States and other wealthy economies.

However, the IMF has cut estimates for a number of developing countries struggling with surging COVID-19 infections.

''The divergence is based largely on better access to COVID-19 vaccines and continued fiscal support in advanced economies, while emerging markets face difficulties on both fronts, the IMF said in an update to its World Economic Outlook,'' Reuters reported. 

Overall, global economic growth prospects remained strong, even though most economists in Reuters polls were worried about new variants of the coronavirus.

Analysts tracking mobility data remain confident about fuel demand, counting on vaccinations.

Global oil markets are expected to remain in deficit despite a decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, to raise production.

''While the delta-variant continues to spread in the US, it is unlikely to meaningfully tighten mobility restrictions and derail the recovery in energy demand. Elsewhere, road traffic in Asia continues to recover while air travel is also rising at a fast clip, particularly in Europe, but with the US and China also continuing to post gains,'' analysts at TD Securities said.

In recent trade, the Inventory data from the American Petroleum Institute (API) had little impact on the market:

• Crude -4.728M. 
• Cushing -0.126M. 
• Gasoline -6.226M.
• Distillate -1.882M.
   

Meanwhile, the pending risk events are the Federal Reserve and the US Energy Information Administration on Wednesday. 

Analysts polled by Reuters expected the data to show US crude stocks fell by about 2.9 million barrels and gasoline stocks fell by 900,000 barrels in the week to July 23.

As for the Fed, anything could happen, but the market is positioned for a hawkish hold and some acknowledgement of the Delta variant risks in which both should be supportive of the greenback and not a surprise for the markets. 

WTI technical analysis

The price is supported by the 23.6% Fibonacci retracement of the current daily impulse near 70.50.

The bulls can target the 78.6% Fibonacci retracement of the prior bearing impulse that has a confluence with the 13 July lows at 73.13. 

With all that being said, there could be a deeper correction first of all to test the bullish commitments at the 38.2% Fibo near 69.50 and below the psychological 70 level.