WTI trades in red near $58 ahead of weekly API data

• WTI's recovery loses momentum before testing $60 handle.
• IEA forecasts a surplus of 1 million barrels per day in first half of 2020.
• Coming up: API's weekly crude oil stock report.

After closing the previous two weeks with losses and erasing more than 7% since the start of the year, the barrel of West Texas Intermediate (WTI) staged a rebound at the start of the week but lost its momentum before testing the critical $60 handle on Monday.

The WTI lost 0.7% on Tuesday before continuing to push lower on Wednesday and was last seen trading near $58, down 0.35% on a daily basis.

Supply-demand dynamics continue to drive oil prices

On Tuesday, the head of the International Energy Agency, Fatih Birol, told the Reuters Global Markets Forum at the World Economic Forum meeting in Davos said the IEA was forecasting a surplus of 1 million barrels per day in the first half of 2020 to put pressure on crude oil prices.

On the other hand, heightened geopolitical tensions in Libya, which triggered the recovery earlier this week, seems to be limiting the losses for the time being. Commenting on this development, "recent unrest in Libya has seen the country’s National Oil Corporation declaring force majeure, production of about 700kb/d could be held up," said ANZ analysts. "Iraq is another producer vulnerable to production risk." 

Later in the day, the American Petroleum Institute's weekly crude oil inventory report, which last week showed a build of 1.1 million barrels, will be looked upon for fresh impetus.

Technical levels to consider