Crude Oil Prices Wobbled With Wall Street on Inflation Story, Will WTI Extend Drop?

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Crude Oil, WTI, US CPI, 30-Year Treasury Auction, Technical Analysis – Talking Points:

  • Crude oil prices wobbled with volatility on Wall Street
  • US CPI data and 30-year Treasury auction key culprits
  • Retail positioning trends offer bearish-contrarian view

Crude oil prices weakened over the past 24 hours as the growth-linked commodity was rocked by volatility in stock markets. A much higher-than-expected US CPI print sent front-end Treasury yields soaring as markets priced in a more hawkish Federal Reserve.

Meanwhile, a soft 30-year Treasury auction saw yields hit a high of 1.94%, more than the 1.88% pre-auction rate. The difference of 5.2 basis points, also known as the tail, was the largest on record for the 30-year auction.

Given that the commodity is largely priced in US Dollars across the globe, the Greenback’s strength tamed WTI. Still, historically high inflation is pressuring the White House to tap into strategic petroleum reserves. It remains to be seen if that will be enough to offset OPEC’s hesitation to increase output hikes beyond their current trajectory.

Check out the DailyFX Economic Calendar for more key events!

Crude Oil Technical Analysis

WTI crude oil prices recently bounced off the 200-period Simple Moving Average on the 4-hour chart below. The line maintained the broader uptrend despite near-term weakness around October peaks. The latter makes for a key zone of resistance between 84.62 and 85.39. Resuming losses entails a breakout under the key 79.15 – 78.24 support zone. Until then, oil could remain in a fairly choppy state.

WTI 4-Hour Chart

Crude Oil Prices Wobbled With Wall Street on Inflation Story, Will WTI Extend Drop?

Chart Created Using TradingView

Oil Sentiment Analysis – Bearish

According to IG Client Sentiment (IGCS), about 51% of retail traders are net-long WTI. Downside exposure has declined by 12.02% and 15.90% over a daily and weekly basis respectively. IGCS tends to be a contrarian indicator. Since most traders are net-long, this suggests prices may fall. Recent changes in positioning are further underscoring this outlook.

Crude Oil Prices Wobbled With Wall Street on Inflation Story, Will WTI Extend Drop?

*IGCS chart used from November 10th report

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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