WTI fails to justify OPEC’s Oil demand optimism around $79.00 amid risk-off mood

• WTI extends pullback from two-week high amid sour sentiment.
• Tensions surrounding unidentified objects, hawkish Fed weigh on commodity prices.
• OPEC expects upbeat energy demand, Russia braces for Oil production cut.
• US inflation data will be crucial for clear directions.

WTI crude oil pares the previous day’s gains around $79.00, down 1.22% intraday during early Monday, as energy buyers fail to ignore the broad risk-off mood. In doing so, the black gold also falls short of cheering the price-positive news from Russia and the Organization of the Petroleum Exporting Countries (OPEC).

Russia will cut crude oil production by half a million barrels per day starting in March, mentioned CNN Business. The news also cites the Western sanctions on Moscow’s energy supply curbs as the catalyst behind the move that propelled Oil prices on Friday.

On the same line, OPEC Secretary-General Haitham Al Ghais said over the weekend at an energy conference in Cairo that the cartel “expects global oil demand to exceed pre-pandemic levels in 2023,” reported Reuters.

While the hopes of higher demand and lesser supplies put a floor under the Oil price, the market’s risk-aversion joins the firmer US Dollar to weigh on the commodity prices. Among the key catalysts fueling the US Dollar Index (DXY), up 0.20% near 103.80 by the press time, are the fears about the mystery objects flying over the US and China. The US shot down nearly four such objects while China prepares to hit one such unidentified object while weighing on the market sentiment and fueling the DXY.

The market’s risk-off joins the mildly positive Fedspeak, especially after Friday’s strong US Consumer Sentiment and inflation expectations, to also weigh on the WTI crude oil. During the weekend, Philadelphia Federal Reserve President Patrick Harker pushed back the chatters of a Fed rate cut during 2023. However, the policymaker did mention, “Fed not likely to cut this year but may be able to in 2024 if inflation starts ebbing.”  His comments were mostly in line with Fed Chair Jerome Powell’s cautious optimism and hence challenge the US Dollar buyers.

Looking forward, WTI crude oil may await more clues for clear directions amid a light calendar. Hence, it may extend the latest pullback ahead of Tuesday’s US Consumer Price Index (CPI) for January. Should the US inflation data arrive as firmer, the fears of hawkish Fed actions and economic slowdown weigh on the energy benchmark.

Technical analysis

WTI crude oil remains sidelined between the one-week-old support line and the 100-DMA, respectively near $78.80 and $80.90.