Cautious optimism along with a weaker dollar underpins oil recovery, WTI extends session higher

2023-04-11 16:22:11

WTI crude refreshed an intraday high near $80.40 in the European morning on Tuesday, as the dollar weakened and it cheered a mildly positive market sentiment. Even so, oil prices are consolidating within the trading range of around $2 a week ago as the market returned to full swing after the long weekend.

The U.S. dollar index (DXY) broke a four-day uptrend and is currently down at 102.25, down 0.32% on the day. In the process, the greenback came under pressure from comments from John Williams, president of the New York Fed and vice chair of the Fed's rate-setting committee, as he cited the growing chance of softer inflation.

Meanwhile, Rick Riedel, chief investment officer for global fixed income at BlackRock, the world's largest asset manager, said late Monday that "the Fed may not need to raise rates further to fight inflation, As the fallout from last month's banking turmoil and a recent spate of labor data point to a slowdown in the U.S. economy," Reuters reported.

On the other hand, hopes of a China-Australia trade deal and more investment in Japan painted cautious optimism in the market.

Optimists were also favored by upbeat headlines from IMF Managing Director Kristalina Georgieva, who said on Monday that global economic growth in 2023 is estimated to be below 3%. %, with India and China expected to account for half of global growth this year.

CME's FedWatch tool showed a near 71 percent chance of the U.S. central bank raising interest rates by 0.25 percent in May, challenging market sentiment and buyers of WTI crude oil. Also weighing on risk appetite and energy benchmark prices were lower Chinese inflation data and caution ahead of U.S. CPI.

On top of that, OPEC+ supply cuts combined with hopes of more energy demand from the world's largest energy importer supported WTI's upward momentum.

Next, weekly oil inventory data from the American Petroleum Institute (API) (prev -4.346 million) may guide WTI prices. However, the main focus will be on the IMF spring summit and US inflation data for direction. Analysts expect inflation to hold steady in March from the previous month.

The United States will also release the minutes of the Federal Reserve's March meeting on Wednesday, which are expected to provide more clues about its stance on future interest rate hikes. Despite the banking crisis, the Fed raised interest rates by 25 basis points at its last meeting and said it would continue to tighten policy to combat high inflation.

Also in focus this week are the monthly oil market reports from OPEC and the International Energy Agency (IEA), which will be released on Thursday (13th) and Friday (14th), respectively. The two organizations had previously predicted that China's economic recovery would push oil demand to record highs this year.

WTI Crude Oil Technical Analysis

WTI crude oil buyers appear to have run out of fuel after repeatedly running into resistance at a four-month-old resistance line, currently around $81.65.



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