WTI licks its wounds below $79.00 as supply crunch fears take a back seat

• WTI stays depressed after falling the most in a fortnight.
• API inventories improve from -3.069M to -1.3M for the week ended on December 23.
• Russian decree on oil export pause gains little acceptance from market as it’s detached from OPEC+.
• Doubts on China unlock, firmer US Dollar exert more downside pressure on the Oil price.

WTI crude oil holds lower ground near $78.80 during early Thursday, after posting the two-day downtrend, as the commodity bears seek more clues to extend the latest south-run amid the holiday season.

Even so, the oil bears keep the reins amid receding fears of a supply crunch, as well as fresh doubts on demand from China. Additionally weighing on the black gold could be the latest weekly prints of the American Petroleum Institute’s (API) Crude Oil Stock data.

That said, the API Weekly Crude Oil Stock marked a decline of -1.3 million barrels versus the previous draw of -3.069 million barrels.

Elsewhere, multiple restrictions on Chinese travelers reverse the previous optimism surrounding the dragon nation’s unlock and renew fears of less oil demand from the world’s biggest commodity user. Recently, the US Health Official mentioned, “Beginning January 5, all passengers from China aged 2 and up will be required to undergo a Covid test two days before departure.” Previously, India, Japan, Taiwan and Italy announced requirements for COVID tests for visitors from China. Also teasing the WTI sellers was news from Reuters suggesting inconsistent virus details from Beijing. “China reported three new COVID-related deaths for Tuesday, up from one for Monday - numbers that are inconsistent with what funeral parlors are reporting, as well as with the experience of much less populous countries after they re-opened,” reported Reuters.

On the other hand, the Russian decree to stop exports to the countries adhering to the EU oil price cap lost importance as it is detached from OPEC+ and hence suggests minor effects on the energy markets.

It should be noted that the escalation in the Russia-Ukraine tension joins the fears emanating from China to propel the US Treasury yields and the US Dollar, which in turn weighs on the WTI crude oil prices amid the holiday season. However, the official weekly inventory data from the US Energy Information Administration (EIA) will be eyed for fresh impulse.

Technical analysis

A clear downside break of the three-week-old ascending support line, around $78.50 by the press time, becomes necessary for the WTI crude oil bears to retake control. Meanwhile, the 50-DMA hurdle surrounding $81.15 guards the quote’s short-term upside moves.