WTI licks its wounds near 2022 low with eyes on China, Russia

• WTI prints mild gains at the lowest levels in 2022, snaps four-day downtrend.
• Russian President Vladimir Putin’s comments, China’s easing of zero-Covid policy favor bulls.
• Fears of economic recession, price cap on oil exports from Moscow probe oil buyers.
• US inventory build, rebound in Treasury yields also challenge energy bulls amid mixed clues.

WTI crude oil picks up bids to print half a per cent intraday gains near the $73.80 level heading into Thursday’s European session. In doing so, the black gold consolidates the weekly loss around the lowest levels in 2022.

That said, the commodity’s rebound could be linked to the geopolitical fears surrounding Russia and hopes of more energy demand from China.

Russian President Vladimir Putin’s threat of using nuclear weapons contrasts with the latest comments from German Chancellor Olaf Scholz, suggesting easing the risks of Moscow using atomic weapons. Furthermore, China’s gradual easing of the Zero-Covid policy appears as a passive reopening and struggles to impress the bulls.

However, Bloomberg came out with the news suggesting more tension between the US and China due to the latest bills the US Congress is up for passing, which tests the oil buyers. “The US is set to pass legislation revamping US policy toward Taiwan and restricting government use of Chinese semiconductors, moves that appear certain to antagonize Beijing even as President Joe Biden seeks to ease tensions,” said Bloomberg.

On the same line could be the recent improvement in the weekly stockpile data from the US Energy Information Administration (EIA). That said, the official inventory improved while flashing a -5.187M figure for the week ended on December 02 versus -12.58M prior.

Above all, growing fears of an economic slowdown could be witnessed in the market’s rush towards risk-safety, as appeared from the US Treasury bond prices rally. The same drowns the oil prices, the Eurozone’s readiness to cap Russian oil exports and Moscow’s rejection to supply at that price. Furthermore, OPEC+ inaction and the US push for more oil supplies also weigh on the black gold.

Moving on, a light calendar can keep the commodity directionless, but the risk-off mood may weigh on the quote ahead of the following week’s critical Federal Open Market Committee (FOMC) meeting.

Technical analysis

An apparent U-turn from the 50-DMA, around $83.85 by the press time, directs WTI crude oil bears towards a downward-sloping support line from April 2022, close to $68.70 at the latest.