WTI advances firmly towards $96.50, ahead of API-report and Fed meeting

• The US crude oil benchmark snaps three days of consecutive losses and rises despite US data showing the US economy is slowing.
• A US recession and subsequent China’s Covid-19 lockdowns might weigh sharply on WTI price.
• Libya would increase its oil output from 860K to 1.2 million BPD amidst political turmoil.

Western Texas Intermediate (WTI) rises 1.40% on Monday as US equities gain, portraying an upbeat market mood, despite weaker than expected US economic data paints a gloomy scenario for the economy, reigniting recession fears. At the time of writing, WTI is exchanging hands at $96.65 per barrel.

Traders’ mood is positive, despite dismal US economic data flashing recession

Sentiment remains positive as investors await US corporate earnings reports. The Fed Chicago National Activity Index contracted for the second straight month. At the same time, the Dallas Fed Manufacturing Index also plunged, indicating that the US economy is in worse conditions than estimated. Consequently, as shown by the US Dollar Index, the greenback weakened, dropping 0.09%, a tailwind for WTI.

Fundamentally speaking, the narrative has not changed. Energy prices remain high, a US recession looms, and the Ukraine-Russia conflict extends for five months. US Monday’s data further increased traders’ worries regarding a recession and might cut fuel demand, a headwind for WTI prices.

Additionally to US factors, China’s Covid-19 zero-tolerance restrictions have taken their toll on oil prices. The second-largest economy narrowly missed a contraction in Q2 and grew by 0.4% YoY.

In the meantime, financial analysts remain skeptical about Libya’s output as the country deals with political uncertainty. Nevertheless, Libya’s National Oil Corporation said it would like to bring back 1.2 million BPD in two weeks from 860K. That, alongside EU countries imposing a cap on Russian oil, would keep the black gold prices volatile in the week ahead.

What to watch

In the week ahead, the US economic docket will feature the API Crude Oil Stock Change for July 22, on Tuesday, with the previous reading standing at 1.86M. On Wednesday, the EIA would unveil its gasoline and crude oil inventories alongside the US Federal Reserve monetary policy decision.

WTI Key Technical Levels