WTI retraces from daily highs around $87, eyeing the 20-DMA

• WTI bounces off the 20-day EMA and holds to minimal losses of 0.11%.
• The PBoC decided to continue stimulating China’s economy, a tailwind for the WTI price.
• OPEC’s cut has been outweighed by recent US dollar strength due to future Fed hikes.

US crude oil benchmark, also known as Western Texas Intermediate (WTI), paring its earlier losses and prints gains of almost 0.40% on Monday as China’s continuing losing monetary policy, would likely make up for any diminished demand amidst high inflation and an economic deceleration, sparked global recession fears. Nevertheless, at the time of writing, WTI is trading at $85.33 per barrel, below its opening price by 0.32%.

WTI drops despite China’s efforts to stimulate its economy as the greenback extends its losses

The People’s Bank of China (PBoC), China’s central bank, announced that it would continue to stimulate the economy, rolling over medium-term policy loins on Monday while maintaining its key interest rate unchanged for the second straight month. That put a lid on the oil’s rally propelled by a weaker US dollar.

Worth noting that during the Chinese Communist Party Congress, Chinese President Xi Jinping emphasized that his government would extend a zero-Covid policy, which would likely impact oil demand.

In the last week, Fed officials reiterated that the US central bank would continue tightening its monetary policy. Most street analysts expect the Federal funds rate (FFR) to peak at around 4.765-5%. Therefore, further US dollar strength is foreseen, a headwind for black gold.

Elsewhere, OPEC’s decision to cut production by more than an estimated 2 million barrels has increased flows to the oil market. According to Reuters, “Hedge funds and other money managers purchased the equivalent of 47 million barrels of petroleum-related futures and options in the week to Oct. 11.”

WTI Key Technical Levels