WTI drops like a stone as markets kick into gear following US CPI

• WTI is falling into the abyss and eyes below $77.50 lows.
• US CPI sees the US Dollar catch a late bid. 

US crude prices are adding to earlier declines, falling after the US Consumer Price index data and during the Wall Street cash open. West Texas Intermediate crude oil was down 1.4% on the day at the time of writing, slightly up from the lows of around $77.69 a barrel but well below the highs of USD79.80bbls.

The US inflation report came in a bit hotter than expected, raising some concerns about future oil and fuel demand in the world's top oil-consuming nation. However, overall, Fed swaps indicate that 2023's anticipated funds rates won't change much as a result and that had seen some softness in the US Dollar initially. 

Ahead of the data, markets expected the Fed's target rate to peak at 5.188% in July, from a current range of 4.5% to 4.75%. Fed funds futures are now pricing in top-fed funds fund rate of 5.%-5.25% by July, vs earlier near-even odds seen of a higher fed funds rate. However, the US Dollar turned higher as markets started to digest the data which has also weighed don the oil price. 

US Consumer Price Index has come out in line with expectations for the month-over-month data 0.4% vs 0.4% expected. Meanwhile, US January CPI for the year came in at +6.4% vs +6.2% expected.

It is also worth noting that analysts at TD Securities explained that ''CTA trend followers are marginally adding back their shorts in Brent crude after reports of congressionally mandated SPR sales soured sentiment in the energy complex.''

''RBOB gasoline is taking the brunt of the hit from CTAs, with current prices pointing to a substantial selling program equivalent to -9% of the cohort's maximum historical position size. Still, the trend in time spreads points to a tighter physical market on the horizon, as evidence of a demand boom from China's reopening is apparent in travel.''

WTI technical analysis

The price is falling to key support area that guards a move towards $77.00bbls. The ATR is $2.50 which gives room for some more to go to the downside.