WTI sticks to modest gains around $78.35-40 area, just below one-week peak set on Tuesday

West Texas Intermediate (WTI) Crude Oil prices attract some dip-buying near the $77.65 region during the Asian session on Wednesday and for now, seem to have stalled the overnight pullback from a one-week high. The commodity currently trades around the $78.40 area, up over 0.30% for the day, and continues to draw support from a combination of factors.

The International Energy Agency (IEA) on Tuesday joined the Organization of the Petroleum Exporting Countries (OPEC) in raising its Oil demand growth forecast for 2023. This comes on top of the recent announcements by Saudi Arabia and Russia, to extend the extra voluntary cuts until the end of December. This, along with the prevalent US Dollar (USD) selling bias, turns out to be another factor acting as a tailwind for Crude Oil prices.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near its lowest level since September 1 touched in the aftermath of softer US CPI on Tuesday, which reaffirmed dovish Federal Reserve (Fed) expectations. Market participants now seem convinced that the US central bank is done raising rates. Apart from this, the risk-on mood further undermines the safe-haven buck and benefits the USD-denominated commodity.

The uptick in Oil prices, however, lacks bullish conviction in the wake of signs that tensions in the Middle East could be easing. In the latest developments surrounding the Israel-Hamas conflict, US President Joe Biden said he was holding daily discussions to secure the release of hostages held by the Hamas militant group and believes that it will happen.  This has led to a reduction in the war risk premium and might keep a lid on any further gains for the black liquid.

Moving ahead, Wednesday’s US economic docket, featuring the release of the Producer Price Index (PPI), monthly Retail Sales and the Empire State Manufacturing Index will influence the USD later during the early North American session. Traders will further take cues from the US Energy Information Administration's (EIA) first oil inventory report in two weeks for some meaningful impetus and grab short-term opportunities around Crude Oil prices.

Technical levels to watch