- WTI Crude Oil has recovered from the one-week low of $71.48.
- Investors are having a rethink of the sell-off, especially amid an inventory drawdown.
- The four-hour chart shows that WTI escaped oversold conditions.
Supply could be lacking, despite extended supply from the OPEC+ – that seems to be the current thinking in oil markets. WTI Crude Oil has advanced toward $73 after prices hit a one-week low of $71 earlier in the day.
Commodity investors are having a rethink about the compromise between Saudi Arabia and the United Arab Emirates (UAE), which results in an output increase by the cartel and its allies. An agreement was in the works and priced in ahead of the announcement.
On the other hand, the weekly US oil inventory report showed a considerable drawdown of 7.9 million barrels, nearly double the early expectations. That publication came out later than expected on Wednesday and could be fully digested on Thursday.
Headwinds include the rapid spread of the Delta covid variant, which could weigh on demand from US consumers in the peak of the driving season. Federal Reserve Chair Jerome Powell is testifying on Capitol Hill and said that further substantial economic progress is needed before the bank reduces its bond-buying scheme. Prospects of additional support from the Fed also support oil prices.
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The Relative Strength Index on the four-hour chart nearly dropped below 30 but bounced – a textbook avoidance of oversold conditions. On its way up, WTI recaptured the 200 Simple Moving Average, showing the downside move was a false break.
Resistance awaits at $73.60, where the 50 and 100 SMAs hits the price. It is followed by $75 and $76.40.
Support is at $71, followed by $$70.30 and $69.50.
