WTI crude oil struggles at 3.5-month top near $82.00 as risk aversion joins supply crunch woes

• WTI crude oil seesaws at multi-day high as risk-off mood prods energy buyers.
• Notable draw in Oil inventories, the heaviest slump in OPEC crude output in three years favor bulls.
• US credit rating cut, fears of US-China tussle prod sentiment and the WTI buyers.
• US ADP Employment Change for July, EIA Weekly Oil Storage Change eyed for clear directions.

WTI crude oil struggles to keep the bullish momentum intact after a four-day uptrend that poked the highest level since April 17 early Wednesday. That said, the energy benchmark remains sidelined, easing of late, around $81.80-85 heading into the European session as the risk aversion jostles with the talks of receding energy supplies.

On Tuesday, Bloomberg came out with a survey suggesting the heaviest fall in Crude Oil production by the Organization of Petroleum Exporting Countries (OPEC) in three years, to 900,000 barrels per day (bps) last month to an average of 27.79 million barrels per day.

Additionally favoring the black gold buyers is a steep draw in the Oil inventories as per the American Petroleum Institute (API). That said, the API Weekly Oil Storage Change slumped to -15.4M from 1.319M prior.

On the contrary, market sentiment sours as the Fitch Ratings downgrades the US government credit rating from AAA to AA+ while terming fears of the debt crisis as the key catalysts. Following the announcements, the White House and US Treasury Secretary Janet Yellen rushed to criticize the move and defend the US Dollar but failed of late. However, the recent market chatters, mainly from big bankers, suggest that such a rating cut is likely to have a major negative impact on the US fundamentals and hence test the risk-off mood.

While portraying the mood, the S&P500 Futures printed a 0.40% intraday loss to 4,590, down for the second consecutive day after Wall Street closed mixed, whereas the US 10-year Treasury bond yields retreat from a three-week high to 4.03% by the press time. Additionally, the US Dollar Index (DXY) stays defensive around 102.00, recently picking up bids, as it prints the first daily loss in three after refreshing the highest levels since July 10 the previous day.

Moving on, the weekly Oil inventories from the US Energy Information Administration (EIA), expected -0.9M versus -0.6M prior, will be crucial to watch for clear directions of the Oil price. Also important is the US ADP Employment Change for July, expected 189K versus 497K prior.

Technical analysis

WTI crude oil appears running out of upside momentum as RSI (14) line turns overbought. Also challenging the black gold buyers is the existence of a nine-month-old horizontal resistance area surrounding $83.30. Though, the Oil price pullback appears elusive beyond the $80.00 round figure.