WTI licks its wounds near $77.00 as recession woes ebb, US macro, API inventories eyed

• WTI rebounds from eight-month low as markets pare recent losses.
• Fears of slowdown in demand, higher supply joined firmer US dollar to favor bears earlier.
• Comments from Iraq, pullback in DXY join cautious optimism to underpin corrective bounce.
• Recovery remains elusive as central banks stay hawkish, economic slowdown looms.

WTI crude oil portrays a corrective bounce amid Tuesday’s quiet Asian session, around $77.10 by the press time of the pre-European session.

In addition to the lack of data/events during early Tuesday, the US dollar’s pullback and hopes of avoiding the recession seem to have favored the energy benchmark’s recovery from the lowest levels since January 2020.

That said, the US Dollar Index (DXY) retreats from the 20-year high, down 0.40% intraday near 113.68 by the press time, as softer yields join downbeat US data and inflation expectations.

That said, US Treasury yields retreat from the multi-year high while the S&P 500 Futures also print mild gains by the press time. That said, US 10-year Treasury yields rose to the highest levels in 12 years while the 2-year bond coupons refreshed the 15-year top as traders rushed to the risk safety. Further, Chicago Fed National Activity Index weakened to 0.0 in August versus 0.09 market expectations and an upwardly revised prior reading of 0.29. Further, the US inflation expectations as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, signaled that the gauges refreshed the multi-day low on Monday. While noting the details, the longer-term inflation expectations dropped to the lowest level since July 13, 2022, whereas the 5-year benchmark slumped to the lowest levels since June 2021 with the latest figures being 2.32% and 2.33% respectively.

Elsewhere, Iraq Oil Minister Ihsan Abdul Jabbar on Monday said the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, are monitoring the oil price situation, wanting to have a balance in the markets, per Reuters.

Moving on, weekly prints of the American Petroleum Institute’s (API) Crude Oil Stock data, previous 1.035M, will join the US CB Consumer Confidence for September and Durable Goods Orders for August to determine short-term WTI moves.

Overall, oil prices are likely to remain amid economic fears and a firmer US dollar.

Technical analysis

WTI bulls need to cross the previous support line from May 11, around $77.60 at the latest, to keep buyers hopeful.