WTI continues rangebound action around $74.00 despite soaring recession fears

• Oil price is displaying a sideways auction after a perpendicular fall.
• Solid US payroll data is acting as a twin-edged sword for the oil price.
• Upside revision in China’s GDP projections could bring some optimism for the black gold.

West Texas Intermediate (WTI), futures on NYMEX, is displaying back-and-forth moves in a narrow range around $74.00 in the early Tokyo session. The oil price is struggling to get a direction after a perpendicular fall to near $73.00 from the critical resistance of $81.00.

The black gold remained inside the woods despite the release of solid United States Automatic Data Processing (ADP) Employment Change data. According to the agency, the United States economy has generated fresh 235K vs. the expectations of 150K and the former release of 127K.

Solid US payroll data is acting as a twin-edged sword for the oil price. No doubt, higher demand for labor force is generally required to cater to bumper demand from firms to address operations, which displays a stellar requirement of oil to execute operations. On the other side, a tight US labor market will be compromised with higher wage inflation, which would not provide any room for the Federal Reserve (Fed) to look for moderating the pace of policy tightening till the end of CY2023 and may also trigger recession fears.

Commenting on the minutes of the Federal Reserve's December policy meeting, TD Securities analysts noted that officials remained in broad agreement about the need to push the policy stance further into restrictive territory in the near term. Therefore it expects another 50 basis points (bps) rate increase in February, and expects 25 bps rate hikes in March and May. It projects that the Fed will therefore settle on a terminal Fed funds target rate range of 5.25%-5.50% by May."

Meanwhile, a significant pace adopted by the Chinese administration in reopening the economy for spurting the volume in economic activities has resulted in an upside revision of Gross Domestic Product (GDP) projections. The National Bureau of Statistics had revised China’s real GDP growth to 8.4% for 2021 (previous 8.1%), a higher base comparison for 2022.” This could result in a rebound in the oil prices ahead.