WTI bulls take a breather above $71.00 despite upbeat API oil inventories, EIA data eyed

• WTI grinds higher past $71.00 after posting the biggest daily gain in 12 days.
• API Weekly Crude Oil Stock posted surprise draw for the week ended on December 17.
• Risk-on mood, softer USD favor bulls but Omicron woes challenge further upside.
• EIA stockpile data, US economics to offer an active day.

WTI battles monthly resistance line after rising the most in over two weeks the previous day. That said, the oil benchmark retreats to $71.22 during early Wednesday morning in Asia.

The black gold benefited from the market’s optimism to overcome the virus woes. However, the weekly industry inventory report by the American Petroleum Institute (API) couldn’t much help the buyers despite marking a surprise draw of -3.67M versus -0.815M figures for the week ended on December 17.

Global policymakers’ rejections to panic due to the latest spread of the South African covid variant, dubbed as the Omicron, seemed to have favored the sentiment, as well as oil prices of late.

Even as Texas reported the first Omicron-linked death in the US, President Joe Biden refrained from any national lockdowns, as already revealed, while also pushing for faster vaccinations. On the same line were cautious optimism emanating from Pacific nations and the UK. Furthermore, news that the US Food and Drug Administration (FDA) is up for authorizing a pair of pills from Pfizer and Merck to treat Covid-19 as soon as this week, per Bloomberg’s sources, also underpinned the risk-on mood.

Elsewhere, rising geopolitical tensions between the West and Russia, as well as with Iran, hints at future challenges to the supply and favor oil prices. However, the weekly Baker Hughes Rig Count data jumped to the early 2020 levels and challenged the same.

While portraying the risk-on mood, which also helped NZD/USD prices, the US Treasury yields rose 4.8 basis points (bps) to 1.467% whereas the Wall Street benchmarks snapped a three-day downtrend by the end of Tuesday’s North American session.

Looking forward, the official oil inventory data from the Energy Information Administration (EIA) of the US, expected -0.031M versus -4.584M prior, will be important for WTI traders. Also, a slew of data including US Q3 GDP, Core Personal Consumption Expenditures for the third quarter and Chicago Fed National Activity Index will precede Existing Home Sales to direct short-term oil moves.

Technical analysis

The monthly resistance line challenges WTI bulls around $71.50, a break of which will direct the bulls towards a 200-SMA level of $74.00. However, bullish MACD signals and an upbeat RSI line hint at further upside moves. Meanwhile, pullback moves may aim for the 100-SMA level of $69.83.