WTI consolidates OPEC+ led gains around $50.00 after API inventories

• WTI eases after refreshing the highest since February 25, 2020.
• API stockpiles recede from previous draw to -1.663M during the latest week.
• OPEC+ agreed over Russia, Kazakhstan output hike but not what they asked for, Saudi Arabia prepared for voluntary production cut.
• Risk headlines will be the key, China Caixin PMI, EIA data are important too.

WTI bulls catch a breather around $50.00 on downbeat private oil inventory data during Wednesday’s early Asian trading. The oil benchmark jumped to the fresh high in nearly 10 months after the OPEC+ decision. Also backing the oil buyers were upbeat sentiment and weak US dollar.

As per the latest inventory data from the American Petroleum Institute (API), Weekly Crude Oil Stock for the period ended on January 01 improved from -4.875M to -1.663M. Following the news, the energy benchmark dropped to $49.87 but refrained from declining any further as markets await key election results from Georgia.

On Tuesday, the OPEC+ group comprising the Organization of the Petroleum Exporting Countries and Russia agreed to pump around 75 million barrels per day (mbpd) of extra oil into the markets, way less than the mostly cheered 500 mbpd. Also on the positive side were chatters that Saudi Arabia is up for cutting its output voluntarily.

Also, the US dollar’s drop to a fresh multi-month low, mainly backed by the risk-on mood, favored commodities. The US dollar index (DXY) dropped to the fresh low since April 2018 the previous day before consolidating losses from 89.42, currently around 89.50.

Talking about risks, the market mood seems to ignore fears of the coronavirus (COVID-19) strain while cheering vaccine hopes and expectations that the Democrats will dominate in the US Senate. In doing so, the Sino-American tussle over the New York Stock Exchange (NYSE) delisting of Chinese securities gained a little audience.

Against this backdrop, Wall Street closed in positive territory while the US 10-year Treasury yields also rose by the end of Tuesday’s North American trading.

Looking forward, results from Georgia’s runoff will be the key and so does any updates on covid as well as US-China tension. Further, the official oil inventory data from the Energy Information Administration (EIA), expected -1.5M versus -6.06M prior, will precede China’s Caixin Services PMI, 51 forecast against 57.5 previous readouts, to direct the black gold prices.

Technical analysis

Having breached early-2020 lows, WTI is up for challenging October 2019 low near $51.00 ahead of targeting February’s top surrounding $54.70. Meanwhile, a five-week-old ascending trend line around $47.40 offers immediate support.