Crude Oil at risk of snapping recovery streak as markets head towards Wednesday’s Fed showing

• WTI held onto recovery territory near $78.00 on Tuesday as markets draw tight.
• API reports a steeper-than-expected drawdown in weekly crude stocks.
• EIA follow-up reporting to get drowned out by Fed rate call.

West Texas Intermediate (WTI) US Crude Oil failed to extend an ongoing recovery on the back of renewed hopes of a global supply drawdown. Investor sentiment is buckling down for the wait to Wednesday’s latest Federal Reserve (Fed) rate call and update to the Fed’s “dot plot” of Interest Rate Expectations.

Despite investor sentiment drifting lower ahead of a key Fed outing on Wednesday, Crude Oil markets held steady after the American Petroleum Institute (API) reported a steeper-than-expected drawdown in Weekly Crude Oil Stocks. API Crude Oil stocks for the week ended June 7 contracted by 2.428 million barrels, steeper than the forecast -1.75 million drawdown and helping to eat away at the previous week’s 4.052 million barrel buildup.

Week-on-week Crude Oil Stocks Change counts from the Energy Information Administration (EIA) are due on Wednesday, but will likely get drowned out by a high-impact Fed showing and an update to US Consumer Price Index (CPI) inflation.

The Fed will be updating its Interest Rate Expectations, and investors will be huddled around the economic calendar looking for adjustments to the Fed’s “dot plot”. US CPI inflation is expected earlier Wednesday, and median market forecasts are hoping for MoM CPI inflation to cool to just 0.1% compared to the previous month’s 0.3%.

WTI technical outlook

WTI has recovered nearly 7.5% from recent lows near $72.50 per barrel, but intraday bullish momentum has hit a key technical barrier at $78.00 per barrel. 

Long-term bullish momentum could run into a ceiling in short order if a descending trendline holds. A recovery into the $80.00 handle will also need to break and hold above the 200-day Exponential Moving Average (EMA) near $78.90.

WTI hourly chart

WTI daily chart