WTI eases from fresh 2-1/5 year tops ahead of OPEC, API report

• Consolidates the latest leg higher
• USD buying remains unabated
• Saudi Arabia’s crackdown reports underpin
• US API crude inventory and OPEC reports in focus.

WTI (oil futures on NYMEX) witnessed a knee-jerk spike and printed fresh two-and-a-half year highs of $ 57.69 at the European open, only to quickly reverse the uptick and revert to the Asian trading range seen near $ 57.25.

WTI: Upside remains capped by $ 55

The black gold is seen breaking lower towards $ 55 mark as the US dollar extends its bounce across the board on the back of strengthening Treasury yields. A stronger US dollar makes the USD-denominated oil expensive for the buyers in foreign currencies.

Moreover, a bout of profit-taking cannot be ruled after yesterday’s upsurge to the highest levels since mid-2015, as investors adjust their positions ahead of the US weekly crude supplies report due to be published by the API later on Tuesday.

Oil prices rallied 3% to post the biggest percentage gain since late September, mainly in response to the weekend’s reports of Saudi Arabia’s Crown Prince anti-corruption crackdown, in a show of his grip on power in the world’s top oil exporter.                                       

Moreover, Friday’s bullish US drilling activity report boosted the sentiment around the commodity. The drillers cut eight oil rigs last week, the biggest reduction since May 2016, Reuters reported.

Looking ahead, markets look forward to the release of the OPEC 2017 World Oil Outlook (WOO) and US API stockpiles data for fresh momentum. At the time of writing, WTI drops -0.14% to $ 57.27, while Brent loses -0.45% to $64.00.

WTI Technical Levels

Higher-side levels: 57.69 (multi-month highs), $ 58 (round number), $ 58.76 (classic R2/ Fib R3).

Lower-side levels: 56.83 (daily pivot), 56.10 (5-DMA), 55.50 (psychological levels).