WTI recovers from multi-month low, climbs above $76.00; upside potential seems limited

• WTI edges higher on Friday, though any meaningful appreciating move still seems elusive.
• The worsening global economic outlook and demand concerns weigh on the commodity.
• Easing fears of supply disruptions from the Middle East support prospects for a further fall.

West Texas Intermediate (WTI) Crude Oil prices attract some buyers on the last day of the week and climb to the $76.00/barrel mark during the Asian session. The commodity, however, remains well within the striking distance of the lowest level since July 21 touched on Wednesday and seems poised to settle deep in the red for the third week in a row.

Investors now expect that the Federal Reserve (Fed) would be forced to hold interest rates higher for longer to combat stubbornly high inflation. This has been fueling worries about economic headwind stemming from rapidly rising borrowing costs, which is anticipated to dent crude consumption. In fact, manufacturers in the US, Europe and China all reported worsening business conditions in October. Apart from this, concerns over slowing demand in the US and China – the world's top consumers – continue to weigh on Crude Oil prices.

Traders, meanwhile, are now pricing in a smaller risk premium over the possibility of any supply disruptions from the Middle East in the wake of the Israel-Hamas conflict. Adding to this, signs of increased US and Iranian crude production indicated that oil markets may not be as tight as initially expected. This, to a larger extent, overshadows the fact that major producers Russia and Saudi Arabia pledged to maintain their supply cuts until the end of the year and do little to lend any support to Crude Oil prices, validating the negative outlook.

This, along with the recent US Dollar (USD) recovery, bolstered by reviving bets for one more Fed rate hike, supports prospects for a further near-term depreciating move for the USD-denominated commodity. Even from a technical perspective, this week's sustained break and acceptance below the very important 200-day SMA suggest that the path of least resistance for Crude Oil prices remains to the downside. Hence, any meaningful recovery could be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

Technical levels to watch