WTI Prices Analisis: WTI corrects overbought conditions, outlook remains bright

• WTI retreated below the $83.00 area, still trading in highs since mid-April correcting overbought conditions.
• Soft inflation figures from the US and weaker USD limit losses. Eyes on the Fed speaker later in the session
• WTI’s outlook remains positive amid tighter global supplies.

On Thursday’s session, the West Texas Intermediate (WTI) saw more than 1% losses as investors seem to be taking profits after jumping to a high since November 2022. However, a weaker USD may limit the session’s downside as well as tighter global supplies which cushion Oil prices.

The Consumer Price Index (CPI) for the US rose by 0.2% MoM in July, as predicted, according to the US Bureau of Labor Statistics. However, the annual measure fell to 3.2% YoY, below the 3.3% forecast. In line with expectations, the Core measure increased by 0.2% in the same month, while the YoY measure declined by 4.7% rather than the 4.8% anticipated. As a reaction, US Treasury yields reacted rapidly to the downside as investors are betting on a dovish Federal Reserve, which applied selling pressure to the USD. Higher rates tend to be negatively correlated with Oil prices as they cool down the economy bringing down energy demand and prices.

On the upside, the prospects of further voluntary by the Saudis will contribute to further upside. In addition, a sluggish Chinese economy may push the local government to carry on more aggressive stimulus, which would bolster the economy of the world's biggest oil importer, meaning a higher energy demand. 

WTI Levels to watch

Analyzing the daily chart, the WTI technical outlook is bullish in the short term despite the price correction. The barrel stands well above the 20,100,200-day Simple Moving Averages (SMAs) indicating that the bulls have the upperhand but further correction shouldn’t be taken off the table for the near term as the Moving Average Convergence Divergence (MACD) is flashing signs of bullish exhaustion.

Support levels: $83.00, $80.00, $79.50 (20-day SMA).

Resistance levels: $84.70, $85.00, $86.00.

WTI Daily chart