WTI: Recovery remains capped below 55 despite tightening supplies
- WTI remains just under the fresh 2019 high on early Tuesday.
- OPEC-led supply cut and Venezuelan sanctions propelled the prices on Monday but slump in the US factory orders challenged the upside.
- An upward sloping trend line portrays WTI benchmark’s near-term strength.
WTI crude oil remains shy of $55 on early Tuesday. The WTI benchmark surged to fresh 2019 high of $55.55 during Monday on concerns signalling OPEC+ supply cuts and Venezuelan sanctions. However, the prices failed to hold the strength during the US session as decline in US factory orders and stronger USD challenged the buyers.
With the OPEC supply falling to lowest in two-years and the US sanctions on Venezuela signalling improvement of supply-glut, the WTI surged to a fresh high of $55.55 on early Monday. Adding to upside sentiment was the weekend news that the US President Donald Trump is optimistic about the trade deal and will soon travel China to discuss critical issues with his Chinese counterpart.
The US market open became disappointment for the crude traders as slump in the US factory orders renewed doubts over future demand. The US factory orders slipped to -0.6% during the December 2018 versus +0.3% market forecast. Moreover, report from Genscape Inc. was said to be signalling supplies at the key storage hub in Cushing, Oklahoma, surged by nearly a million. Additionally, the USD strength also undermines the commodity’s appeal.
While OPEC-led supply cuts and Venezuelan sanctions are playing their roles to limit the crude’s downside, challenges to global demand, rising inventory and stronger greenback confines the commodity’s advances.
Looking forward, the US weekly API inventory data at 21:30 GMT tonight becomes immediate concern for the WTI traders. The inventory level last rose to 2.098M during final week of January.
Technical Analysis: Daily chart
The WTI crude oil needs to surpass the $55.50 mark including 38.2% Fibonacci retracement of its last two-month performance during 2018 to aim for $57.20. However, the $57.90-58.10 resistance-region, connection mid-November highs to February lows, could limit further upside. Should prices rally beyond $58.10 on a daily closing basis, the $59.90-60.00 should grab market attention.
On the contrary, an upward sloping support-line, at $53.20 now, may provide strong support to the WTI benchmark, breaking which 50-day simple moving average (SMA) and 23.6% Fibonacci retracement can play its role around $50.55-50. Given the quote’s extended downturn under $50.50, the $50.00 and the $49.10 could be targeted if holding short positions.