WTI attempts recovery from 3-month lows, re-takes $ 50.50

Oil futures on NYMEX attempt a tepid-bounce so far this session, having slumped more-than 5% yesterday to reach the lowest levels since December last year. However, it remains to be seen if oil can sustain the recovery mode amid concerns expressed by the UAE energy minster over higher US inventory levels.

The black gold witnessed steep losses the US crude stockpiles surged dramatically, to hit new record highs. According to the EIA report, the US crude inventories soared last week by 8.2 million barrels, much above the consensus forecasts of a 2 million barrel build. Concerns over rising US inventories outweighed the optimism backed by higher compliance to the OPEC output cut deal by its producers.

Moreover, a resurgence in broad USD demand after a stronger US ADP jobs report also collaborated to the downbeat tone in the USD-sensitive oil. A stronger US dollar makes the dollar denominated oil more expensive for holders in foreign currencies and vice-versa.

Focus now remains on the upcoming US jobs data for fresh direction on the greenback and eventually on oil. In the meantime, investors’ sentiment will continue to be weighed down by bearish EIA crude reserves data.

WTI technical levels        

A break above $ 51 (20 & 10-DMA) could yield a test of $ 51.68 (100-DMA), beyond which $ 52.10 (5-DMA) could be tested. While a breach of support at $ 50.06 (3-month lows) would expose the confluence of Fib S2 and classic S1 support of $ 49.31/24, below which downside opens up for a test of $ 48.87 – 200-DMA support.