WTI challenges key hurdle in Asia, API build may cap gains

• WTI has recovered from overnight lows and currently trades around key SMA hurdle. 
• Sustained risk-on may bode well for the black gold. 
• Big gains, however, may remain elusive, due to bearish US oil inventory report. 

West Texas Intermediate (WTI) crude has bounced up to a simple moving average (SMA) hurdle in Asia. However, the bulls may have a tough time engineering a move to fresh multi-month highs above $41.63 due to the bearish U.S. inventory report released by the American Petroleum Institute (API) on Tuesday. 

At press time, the black gold is trading largely unchanged on the day near $40.40 per barrel, having put in a low of $39.86 during the overnight trade. The 100-hour simple moving average hurdle is currently located at $40.34. 

The recovery may be extended if the global equity markets chalk out gains, keeping the safe-haven US dollar under pressure. At press time, the futures tied to the S&P 500 are reporting 0.10% gains. 

That said, a sustained move above the 3-½ month high of $41.63 reached on Tuesday may remain elusive as the API, on Tuesday, reported a bigger-than-expected build. 

Crude inventories in the US increased by 3.857 million barrels last week compared to the consensus estimate of 299,000 barrels. 

Inventories rose despite the sharp decline in the oil output in the US and are suggestive of weak demand/economy. Oil production in the US fell to 10.5 million barrels per day in the week ended June 12 from 13.1 million barrels per day on March 13, according to the Energy Information Administration. 

As such, one may question the sustainability of the price bounce seen during Wednesday’s Asian trading hours. 

Technical levels