WTI corrects pre FOMC offers on dollar weakness despite tensions of supply glut

• WTI has climbed higher ahead of the FOMC today, with the greenback on the backfoot, falling to a recent low of 96.55.

Overall, having dropped by more than 30% since the early October high, crude prices continue to face a sharp decline, despite the efforts of the OPEC+ group to considerably reduce supply by 1.2 million bpd (barrels per day). Tensions over a potential global supply glut rattled traders earlier this week when reports that Russia was increasing its output to 11.42 million barrels a day this month sent the price over the edge as investors presume that the Organization of the Petroleum Exporting Countries and nonmember allies will not commit to their commitments agreed earlier this month to cut production by 1.2 million barrels a day. At the same time, the American Petroleum Institute reported late Tuesday that U.S. crude supplies rose by 3.5 million barrels for the week ended December 14th according to sources.

Eyes on the Fed

In the near term, we await the outcome of the Fed. The Fed is widely expected to hike rates to 2.50%, leaving the focus on the policy statement language, Chairman Powell's press conference, and updated economic projections. The market hinges on the dots and tone while investors also look for a discussion on the balance sheet policy. Markets are looking for a more dovish stance. 

WTI levels

Technical indicators, such as RSI on the 4hr time frame, have moved back out of oversold territory and are heading more neutral. RSI on the daily time frame is also less negative as price stablises. The price for WTI was skidding lower below the 76.4% fibo retracements of the late June 2017 lows to 2018 highs range, but bulls have stepped in at the pivot ahead of a full retracement of the June 2017 uptrend to 42.12bbls. The 61.8% Fibo of the Feb 2016 to 2018 highs is located at 45.30. On the flipside, bulls need to get back above 51.30, as the 50% level of the same range.