WTI drops back towards $ 47.30 on renewed oversupply concerns

Oil futures on NYMEX stalled its steady recovery path and fell back towards six-week lows of $ 47.30 in early Europe, as sentiment soured amid resurgence of supply glut concerns, after the US EIA crude stockpiles report showed a lesser-than expected drop in the inventories.  

The Information Administration (EIA) said weekly crude stocks fell by 930,000 barrels to 527.8 million. That was less than half the forecast draw of 2.3 million barrels. Moreover, large gasoline inventories indicate weaker demand, which also weighed down on the prices.

Further, markets remain wary over the extension of the OPEC output cut deal, when the OPEC members meet next month. Additionally, broad based US dollar strength, following a hawkish Fed decision, keeps the sentiment around the USD-sensitive oil undermined.

A stronger US dollar makes the USD denominated oil more expensive for the holders in foreign currencies and vice-versa.      

Focus now remains on the USD dynamics and risk trends for fresh incentives, ahead of the US employment report and drilling data due tomorrow.

WTI technical levels 

A break above $ 48/48.23 (round number/ 5-DMA) could yield a test of $ 48.79 (10-DMA) beyond which $ 49.87 (50-DMA) could be tested. While a breach of $ 47.30 (6-week lows) would expose 47.01 (March lows), below which downside opens up for a test of $ 46.50 (psychological levels).