The downbeat statement from the Federal Reserve on the outlook for economic recovery was behind the sell-off across the global markets
Oil prices dipped on Wednesday despite the EIA delivered an upbeat weekly report. According to the Energy Information Administration, US crude oil inventories declined by 9.9 million barrels last week. Furthermore, U.S. crude production averaged 10.9 million barrels per day in the latest week, a decrease of 100,000 barrels per day from the prior week. In a knee-jerk reaction to the data, Brent crude briefly spiked to intraday highs above the $56 handle. However, the future retreated eventually as risk sentiment deteriorated across the board, sending Wall Street stocks sharply lower overnight.
Today, oil retains a slight bearish bias, flirting with the key 20-DMA, a break below which would pave the way to steeper losses in the short term if risk aversion persists. Following a solid sell-off in Asia, European stocks opened 1% lower in a sign of the persisting profit-taking in risky assets.
The downbeat statement from the Federal Reserve on the outlook for economic recovery was behind the sell-off across the global markets, with oil traders continuing to express concerns over the ongoing pandemic which in turn weakens the outlook for energy demand recovery.
Furthermore, a rally in the safe-haven greenback put Brent under extra downside pressure. If the dollar continues to climb north, oil prices could retreat below the $55 figure during the European hours. In this scenario, the $54.50 next support zone will come into market focus. On the other hand, if the mentioned moving average withstands the selling pressure in the short term, a modest bounce could be expected.
In a wider picture, Brent crude remains close to one-year highs registered above the $57 handle earlier this month. It looks like the futures will resume the ascent after a potential deeper retreat, with global stocks staying within a broader uptrend amid hopes for economic recovery from the pandemic.