WTI advances towards $96.50 ahead of API-report, Fed meeting

WTI crude oil snaps three successive days of losses and rises despite US data showing the US economy is slowing down.

A US recession-linked concerns and subsequent China’s Covid-19 lockdowns do sharply weigh on WTI price direction. WTI crude rose 1.40% on Monday as US equities gain, portraying an upbeat market mood, despite weaker than expected US economic data paints a dull scenario for the US economy, reigniting recession concerns. WTI is exchanging hands at $96.65 per barrel.

Traders’ mood is positive, despite dismal US economic data flashing recession. Libya would increase its oil output from 860K to 1.2 million BPD amidst political turmoil.

The market sentiment is positive as investors await US corporate earnings reports. The Fed Chicago National Activity Index contracted for the second straight month. At the same time, the Dallas Fed Manufacturing Index also plunged, indicating that the US economy is in worse conditions than expected.

US Monday’s data further increased traders’ worries regarding a recession and might cut fuel demand, a headwind for WTI prices.

Consequently, as shown by the US Dollar Index, the US Dollar Index is weakening from earlier highs, dropping 0.09%, a tailwind for WTI. Fundamentally speaking, energy prices remain high, a US recession is perceived to be looming, and the Ukraine-Russia conflict extends for five months.

In addition to US developments, China’s Covid-19 zero-tolerance restrictions have taken their toll on oil prices. The second-largest economy narrowly missed a contraction in Q2 and grew by 0.4% YoY.

In the meantime, financial analysts remain skeptical about Libya’s output as the country deals with political uncertainty. Nevertheless, Libya’s National Oil Corporation said it would like to bring back 1.2 million BPD in two weeks from 860K. That, alongside EU countries imposing a cap on Russian oil, would keep the black gold prices volatile in the week ahead.

The US economic docket will feature the API Crude Oil Stock Change for July 22, on Tuesday, with the previous reading standing at 1.86M. On Wednesday, the EIA would unveil its gasoline and crude oil inventories alongside the US Federal Reserve monetary policy decision.