WTI drops back below $43 amid US dollar rebound, ahead of EIA data

• US dollar rebound drags WTI lower from above $43 levels.
• Iraq exemption from OPEC+ deal likely weighs on the US oil.
• Focus shifts to US ADP jobs and EIA crude stocks change data.

The recovery in WTI (futures on Nymex) from overnight lows of $42.72 lost legs once again above $43 mark, as the rates slipped back on the 42 level in the mid-European session this Wednesday.

The US oil reverses a major portion of the intraday gains and wallows near-daily lows of $42.81, as the US dollar extends the rebound from the dovish Fed-induced massive sell-off. A stronger greenback makes the USD-denominated oil expensive for foreign buyers.

Meanwhile, Iraqi Oil Minister HE Ihsan Abdul Jabbar Ismaael’s announcement that they are seeking an exemption from the OPEC and its allies (OPEC) output cut deal during the first quarter of 2021 also adds to the downward pressure on the black gold.

Despite the latest leg down, the higher-yielding WTI continues to find support from the risk-on rally in the global equities, courtesy of the renewed optimism over the global economic recovery after the manufacturing surveys around the world showed expansion last month.

Additionally, a big drop in the US crude inventories, as reported by the American Petroleum Institute (API) late Tuesday, limits the downside in the commodity. The latest API data showed that the US crude stockpiles fell by 6.4 million barrels for the week ended Aug. 28.

 Markets now look forward to the US ADP employment data for fresh dollar trades while the official US government inventory data due to be published the Energy Information Administration (EIA) will also have a significant impact on WTI.  

WTI technical levels to watch

“WTI Crude holding below 200-day moving average resistance at 4300/20 targets 4260/40. A break below here is a sell signal initially targeting last week's low at 4160/45. There's resistance at 4300/20 but many spike highs at 4343, 4357, 4368 & 4378. All showing bulls getting beaten when they try to get prices to break higher. Therefore, bulls need a clear break above 4380. A break above here is a medium-term buy signal, initially targeting 4480/4500,” Jason Sen at DayTradeIdeas.com noted.

WTI additional levels