October 5, 2022 [FXEMPIRE] – WTI oil pulls back after yesterday’s rebound amid a broad pullback in commodity markets. Stronger dollar and higher Treasury yields have put significant pressure on commodities today.
Yesterday, WTI rallied after the release of a bullish EIA report, which indicated that domestic oil production decreased from 12.1 million bpd to 12 million bpd. Today, recession worries returned, and traders are mostly focused on buying the safe-haven U.S. dollar.
From a big picture point of view, traders should follow the news from EU, which is expected to include a price cap on Russian oil in its next sanctions package. Previously, the EU planned to ban seaborne imports of Russian oil from December 5, but changed its mind and worked to impose a price cap.
It remains to be seen whether the plan will be successful as Russia has previously stated that it would not supply oil to countries that impose a price cap. In this scenario, oil prices will rally as several million barrels per day will get out of the market.
At this point, traders do not take the worst-case scenario seriously and remain worried about demand problems. Perhaps, the market will pay more attention to the price cap story when the EU releases the details of its new sanctions package.
WTI Oil Tests Support At $81
WTI oil is currently trying to settle back below the $81 level. In case this attempt is successful, WTI oil will head towards the next support level, which is located at $78. A move below this level will open the way to the test of the support at $75.50. If WTI oil declines below $75.50, it will move towards the next support at $73.
On the upside, WTI oil needs to stay above the $81 level to have a chance to gain upside momentum in the near term. The next significant resistance level for WTI oil is located at the 20 EMA near the $84 level. A move above the 20 EMA will push WTI oil towards the resistance near the $86 level. In case WTI oil settles above $86, it will head towards the 50 EMA at $89.10.