WTI drops to test $ 45 mark post-IEA report

Despite strong Chinese crude imports and bullish EIA inventory data, oil bears returned to the markets, driving the US oil benchmark – WTI deeper in the red zone.

WTI: Will it hold 45 handle?

Oil prices met fresh supply over the last hour and dropped sharply, breaking lower from a consolidative phase seen so far around $ 45.40. The renewed weakness seen in oil prices is in response to the latest IEA monthly oil market report, which revealed that the OPEC output cut deal compliance stood at its lowest in six months in June.

IEA: Compliance with OPEC cuts slips to 78% in June vs 95% in May

Further, stalled USD selling across the board, also collaborated to the latest leg down in the USD-sensitive oil. A stronger US dollar makes the dollar-denominated commodity expensive for the holders in foreign currencies and vice-versa.

The black gold, however, managed to hold the 45 support, as traders continue to cheer tightening US inventories, while strengthening Chinese crude demand also helps keep the losses limited.

The EIA report showed late-Wednesday that the US crude stockpiles last week registered their biggest decline in 10 months, having dropped by 7.6 million barrels to 495.35 million barrels.

All eyes now remain on the Fed Chair Yellen’s testimony due later today and Friday’s US CPI and drilling data for fresh direction on the commodity. At the time of writing, WTI drops -0.70% to $ 45.17, while Brent also slumps +0.77% to 47.40 levels.

WTI technical levels 

Higher side: $ 46 (key resistance), $ 46.52 (50-DMA), $ 47.10 (Jul 3 high)

Lower side: $ 44.91 (5-DMA), $ 44.51 (Jul 5 low), $ 43.67 (Jun 28 low)