WTI crude oil eases from eight-year high to $86.00 as post-Fed risk-aversion dominates

  • WTI crude oil prices step back from multi-day high, stays pressured around intraday low of late.
  • Fed-led fears propel US Treasury yields and US dollar but Russia-linked geopolitical tensions keep oil buyers hopeful.
  • EIA inventories contrasted API stockpiles, China’s Evergrande, virus woes add to the risk-off mood.
  • US Q4 Advance GDP, Durable Goods Orders eyed for fresh impulse.

WTI crude oil prices consolidate gains near eight-year high, easing to $86.00 amid early Thursday morning in Europe.

In doing so, the black gold respects the broad risk-off mood, as well as downbeat official weekly inventory data from the US Energy Information Administration (EIA). However, the bulls remain hopeful as geopolitical tussles between Russia and Ukraine stay on the table.

Market sentiment sours after the Fed matched the broad consensus of offering a hawkish halt. the US Federal Reserve (Fed) matched wide market expectations to keep benchmark interest rates and tapering targets intact during Wednesday’s Federal Open Market Committee (FOMC) meeting. However, the interesting part from the Monetary Policy Statement was, “The Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”

On a different page, US Secretary of State Antony Blinken and Chinese Foreign Minister Wang Yi discussed how they could advance forward together regarding the Russia-Ukraine conflict, per the US state department spokesperson. It’s worth noting that the US State Department earlier warned Russia over Nordstorm 2 oil pipeline if it invades Ukraine.

Elsewhere, Evergrande said it is targeting a restructuring proposal within six months whereas the virus woes escalate in Japan.

Amid these plays, S&P 500 Futures drop 1.5% while the US 10-year Treasury yields remain firmer around 1.85%, after rising the most in three weeks the previous day.

It’s worth noting that the weekly EIA stockpiles rose past the -0.728M forecast and 0.515M markets expectations to 2.377M at the latest. Earlier in the week, the private industry report, from the American Petroleum Institute (API), showed that the oil inventories shrank 0.872M versus the previous addition of 1.404M.

Looking forward, WTI crude oil traders will pay attention to the aforementioned risk catalysts for fresh impulse, mostly to confirm further bearish bias. However, the first readings of the US Q4 GDP and Durable Goods Orders for December will be important to watch afterward.

Read: US GDP Preview: Inflation component could steal the show, boost dollar, already buoyed by Russia

Technical analysis

Although overbought RSI conditions do challenge WTI bulls, the oil sellers may not take risk of entry until witnessing a clear downside break of the 10-DMA level surrounding $84.80. Even so, an ascending support line from December 20, near $83.50, will challenge the bears.

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