- WTI extends pullback from 2-week highs amid worsening sentiment.
- Tensions over unidentified objects and the hawkish Fed are weighing on commodity prices.
- OPEC expects bright energy demand and Russia is preparing for oil production cuts.
- US inflation data is important for clear direction.
WTI crude fell 1.22% intraday early Monday, capping a gain of around $79.00 the previous day as energy buyers could not ignore the widespread risk-off mood. In doing so, black gold will also not welcome positive price news from Russia and the Organization of the Petroleum Exporting Countries (OPEC).
Russia will cut crude oil production by 500,000 barrels a day from March, CNN Business said. The news also cites Western sanctions over Moscow’s curbs on energy supplies as the catalyst behind the move that pushed oil prices higher on Friday.
Similarly, OPEC Secretary General Haitham Al-Ghais said at an energy conference in Cairo over the weekend that the cartels “expect global oil demand to exceed pre-pandemic levels in 2023.” Reuters reported.
Expectations of higher demand and lower supply underpin oil prices, while market risk aversion adds to a stronger US dollar, weighing on commodity prices. Among the main factors driving the US Dollar Index (DXY), which is up 0.20% near 103.80 at the time of writing, are concerns that a mysterious object is hovering over the United States and China. The U.S. has shot down nearly four such objects hers, while China prepares to strike one such unidentified object she has while squeezing market sentiment and making DXY I’m inciting
Market risk-off is also weighing on WTI crude oil, joining the somewhat positive Fedspeak, especially after strong US consumer sentiment and inflation expectations on Friday. Over the weekend, Philadelphia Fed President Patrick Harker pushed back on talk of a Fed rate cut in 2023. However, policymakers noted that “the Fed is unlikely to cut rates this year, but he could cut rates in 2024 if inflation starts to ease.” His comments are largely in line with Fed Chairman Jerome Powell’s cautious optimism, challenging US dollar buyers.
Looking ahead, WTI crude may await further clues that point to a clearer direction in a brighter calendar. Therefore, on Tuesday he may extend the latest cut ahead of the US Consumer Price Index (CPI) in January. Concerns about the Fed’s hawkish behavior and a slowing economy will weigh on energy benchmarks as US inflation data become more robust.
technical analysis
WTI crude remains set aside between the week-old support line and the 100-DMA, near $78.80 and $80.90 respectively.