WTI sits above $48.00 as API marks drop in oil inventories, focus on EIA data

• WTI consolidates 30-pip jump in oil prices post API data.
• API registered a surprise draw in the stockpile for the week ended on December 25.
• US dollar weakness adds strength to the commodity’s upside momentum.
• Lack of major data/events directs energy traders to eye official inventory reading.

WTI wavers around $48.10/15 after the initially upbeat reaction to the private stockpile data during early Wednesday in Asia. While recently cautious sentiment might challenge the commodities, US dollar weakness, backed by an expected decline in official oil stocks, can favor the energy bulls.

The black gold recently jumped to $48.36, from $48.03, as the American Petroleum Institute (API) released Weekly Crude Oil Stock for the week ended on December 25. As per the latest release, the oil inventories shrank 4.875 million barrels versus the previous addition of 2.7 million barrels.

Other than the inventory reports, US dollar weakness also favors the commodities. The US dollar index (DXY) marked the heaviest losses in nearly two weeks on Tuesday after the American House representatives backed the $2,000 covid stimulus paycheck signed by President Donald Trump. The move is currently heading towards the Senate approval before being law. However, Republicans have stage obstacles for the much-awaited aid package and can challenge the hopes of future oil demand on expectations of further stimulus.

Elsewhere, Reuters came out with the story suggesting further stability in the oil markets, an indirect challenge to curtail the global oil output cut accord, as preferred by the Saudi-Russia meeting. “The Saudi cabinet said it reviewed on Tuesday the results of a Saudi-Russian joint governmental committee meeting, in which the two countries reaffirmed commitment to the cooperation pact between petroleum-producing countries and the declaration of the OPEC+ group to support the stability of global oil markets, a cabinet statement said,” per the news.

Looking forward, updates concerning the US paycheck voting in the Senate and virus news, considering the recent spread of the covid variant, can offer immediate direction to the oil benchmark. Though major attention will be given to the second-tier US data relating to manufacturing and housing will join the official inventory figures from the US Energy Information Administration (EIA), forecast -2.1M versus -0.56M prior, for a clearer direction.

Technical analysis

A six-week-old ascending trend channel formation keeps WTI bulls hopeful unless witnessing a downside break of $47.30.