WTI meets daily resistance as markets await the US CPI data

• WTI is correcting the day's supply and is meeting daily resistance.
• US CPI data will come on Wednesday and could be pivotal for oil. 
• The wild card in the energy sector is the Iran Nuclear Deal.

Oil prices have pared back gains that were made early on Tuesday despite the news that Russia has halted exports on a pipeline to Europe. Markets lack a directional bias ahead of tomorrow's US inflation report due to mixed sentiment surrounding the health of the global economy.  At the time of writing, WTI spot is trading at $90.43bbls and has been stuck in a relatively narrow range of between $89.06 and $92.62.

Oil was initially benefitting from supply concerns. The news that Russia halted oil shipments on the southern leg Druzhba pipeline on Aug.4 lifted prices. cutting 250,000 barrels per day of oil supply to Czechia, Hungary and Slovakia were reported to be taken offline after sanctions prevented transit payments, as Bloomberg reported. The suspension of Russian shipments on the line has been regarded as the country's weaponization of energy exports to the continent in retaliation for the coming European embargo on some oil shipments from Russia.

Meanwhile, traders are going to be glued to the screens for the US Consumer Price Index data on Wednesday as they assess the prospects of a recession in the United States and the wider global economy. Analysts are looking for inflation to have risen less than it had done in July, at around 8.7% or lower on an annualized basis. Nevertheless, such a number would be expected to shore up expectations for the Federal Reserve to hike by 75 basis points next month.

Nevertheless, recessions or not, the Energy Information Administration on Tuesday said it expects US oil production to rise to a record next year while expecting a rise in global oil demand next year. The agency said it expects US oil production to rise to an average 12.7-million barrels per day in 2023, down from its July forecast of 12.77-milion bpd but up from 11.9-million bpd this year and topping the record 12.4-million bpd set in 2019.

The great uncertainty in the energy sector comes with the Iranian Nuclear Deal. Analysts at TD Securities explained that ''the bull market in oil is facing its most significant challenge yet, as negotiators are putting together a final draft for a potential Iranian Nuclear deal agreement in front of Washington and Tehran.

''This is a wildcard for oil markets, given that a resumption of Iranian flows would add a substantial amount of spare capacity to the world, effectively buying some time for other producers to potential catch-up in terms of capital expenditures over the medium-term.''

''In this context, our return decomposition framework highlights that our gauge of supply risk has tumbled in the last week amid the latest round of negotiations. This pins the weakness in oil prices primarily on the supply side amidst fears that a potential deal could change the game in oil markets.''