- Speculation of further tightening by the Federal Reserve is supporting the US dollar, a headwind for oil prices.
- Reopening of China’s economy and expectations of Russia’s oil output cuts capped the fall in WTI.
- WTI technical reasons: neutral to down bias. Once it breaks out of $75.00, it will likely retest the monthly lows.
U.S. crude oil benchmark Western Texas Intermediate (WTI) wiped out Monday’s gains as it hesitated to hit the 20-day exponential moving average (EMA) and closed near 75.97 before settling in at current prices. It has fallen towards the week lows. At the time of entry, WTI is down 0.94% and is trading at 76.64 per barrel.
Crude oil prices affected by strong US dollar
A strong US dollar (USD) narrative is hitting the commodity markets. Federal Reserve (Fed) officials continued their hawkish rhetoric last week, but data backed up some of their comments. Traders should remember that Cleveland and St. Louis Fed Presidents Loretta Mester and James Bullard did not vote on her FOMC, but both supported her 50bps rate hike.
This has sparked speculation that the US Federal Reserve (Fed) will hike rates three times instead of two, which could push the Federal Funds Rate (FFR) to levels of 5.25% to 5.50%. there is.
Meanwhile, the US Dollar Index (DXY), which compares the value of the dollar against a basket of six currencies, rose 0.29% to 104.184, creating headwinds for dollar-denominated assets. Therefore, a strong US dollar means higher oil prices for foreign countries.
Apart from this, China’s reopening is a factor affecting WTI prices, with capped oil prices falling in Tuesday’s session. Russia announced plans in March to cut production by 500,000 bpd, or about 5% of production, in retaliation for Western countries imposing price caps on Russian oil and petroleum-related products.
As for the data, U.S. oil inventories and data that were due to be released on Tuesday were postponed to mark President’s Day and moved to Wednesday and Thursday.
WTI Technical Analysis
From a technical standpoint, WTI is still neutral to down biased, with all exponential moving averages (EMAs) above oil prices. Additionally, the Relative Strength Index (RSI) is in bearish territory and is heading down. The rate of change (RoC), albeit steady, shows that sellers continue to gain momentum.
So the first support for WTI will be $75.97. Once cleared, oil prices fall to last week’s low of $75.36 followed by MTD low of $72.30.