WTI drops back below $58 post-IEA report

• WTI pares back gains amid bearish IEA report, mixed market mood.
• Broad USD supply, falling US crude supply to save the day for oil bulls?
• Six-week lows of 57.38 back in sight as sellers return.

WTI (oil futures on NYMEX) reverses the intraday gains and trades modestly flat in the European trading, having met fresh supply in the last hour after the bearish monthly oil market report from the International Energy Agency (IEA) hit the investors’ sentiment.

The IEA report showed that oil production from non-OPEC countries, including the US, is on the rise while maintaining the global oil demand growth estimates for 2020 at 1.2 million barrels per day (bpd). It further said rising non-OPEC oil production will help the market ward off any supply disruption threat such as the recent Mid East flare-up.

No sooner the report hit the wires, the black gold fell from a high of 58.37 to reach fresh daily lows at 57.88. Mixed feelings about the US-China trade deal amongst the market also keeps the recovery limited in the higher-yielding oil.

However, the further downside looks capped, as the barrel of WTI continues to derive support from the upbeat weekly Crude Stocks report published by the Energy Information Administration (EIA) on Wednesday. The EIA data showed that the US crude oil inventories fell by 2.5 million barrels, compared with expectations of a drop of 500,000 barrels.

Also, a generalized weakness seen in the US dollar helps cushion the losses in the commodity, as a weaker greenback makes the USD-denominated oil cheaper for foreign buyers. In the day ahead, the US consumer spending data will be closely eyed for any impact on the buck and broader market sentiment.

WTI Technical levels to consider