WTI struggles around two-week low below $83.00 as US prepares to ease oil supply crunch

• WTI stays defensive at fortnight low, picking up bids of late.
• Biden administration prepares a plan to increase oil production, complete emergency sales.
• Bullish API, risk-on mood failed to impress oil buyers amid sluggish session, US-led efforts to ease supply crunch.
• EIA stockpiles, risk catalysts will be important for bears to watch.

WTI crude oil remains depressed around $82.80, despite bouncing off a two-week low, as the US administration brace for an oil supply plan on Wednesday. Also likely to have exerted downside pressure on the black gold could be the sluggish markets and a lack of major data/events.

US President Joe Biden will continue to sell barrels out of the nation's emergency reserves through December and lay out a plan on Wednesday to refill the storage at lower than current prices in a bid to help fill the current supply gap and push oil companies to produce more down the road, a senior administration official said reported Reuters. The news appears the US challenge the OPEC+ group after the oil producers rejected the US-led push to ease supply cuts.

The news also mentioned that the Biden administration agrees to make future oil purchases to refill emergency reserves at prices at or below $67 to $72 a barrel. “Biden will announce 15 million additional barrels for delivery from SPR in December, extending initial timeline and completing 180 million commitment,” adds Reuters.

Elsewhere, the weekly industry stockpile numbers from the American Petroleum Institute mentioned that the US crude oil stockpiles fell in the latest week. “Crude stocks fell by about 1.3 million barrels for the week ended Oct. 14. Gasoline inventories fell by about 2.2 million barrels, while distillate stocks fell by about 1.1 million barrels, according to the sources, who spoke on condition of anonymity,” mentioned the news.

The risk profile remains rosy as equities cheered the absence of the UK’s market collapse, even if the political plays are fishy in Britain. Also likely to have gained little response is the European Commission’s (EC) proposal to purchase gas in bulk and cap the prices in case of extreme volatility. Amid these plays, the US 10-year Treasury yields remained sidelined around the 4.0% threshold.

Moving on, the official weekly crude oil stocks change figures from the Energy Information Administration (EIA), expected to ease to 1.551M versus 9.88M prior, will decorate the calendar to direct the oil traders. However, major attention will be given to the risk catalysts and energy headlines from the US and Europe.

Technical analysis

Although the 21-DMA and a fortnight-old resistance line restrict short-term WTI upside around $84.00 and $85.70 in that order, six-week-long horizontal support near $81.50 appears as short-term key support to watch for the oil bears during the quote’s further weakness.