Crude oil prices were little-changed during Wednesday’s APAC session as traders await fresh catalysts from the upcoming OPEC+ meeting. Oil prices fell over 2% a day ago, weighed by a stronger US Dollar and the resumption of traffic in the Suez Canal. The disparity of vaccine rollout progress across the Atlantic led the US Dollar to strengthen against the Euro, sending the DXY US Dollar index to a four-and-half month high of 93.36. A stronger US Dollar exerted downward pressure on commodity prices due to their inherent negative relationship.

Prices are also facing a couple of headwinds, including a larger-than-expected build in API crude inventories, a revision down of this year’s oil demand outlook by OPEC+, and the lingering impacts of a third viral wave in Europe. Against this backdrop, market participants are expecting OPEC+ to roll over its current production cut through May to stabilize prices.

At the previous month’s meeting, Saudi Arabia surprised the markets by announcing a unilateral, voluntary 1 million bpd cut. This move sent WTI to its 22-month high before a technical correction followed. Prices have retreated 8.8% from the recent peak, as the energy demand outlook was tarnished by renewed lockdown measures in Europe amid a third viral wave and delays in vaccine rollouts in the region.

The American Petroleum Institute (API) reported a larger-than-expected rise in crude inventories for the week ending March 26th. Stockpiles increased by 3.91 million barrels, compared to a baseline forecast of 0.107 million barrels. This suggests that demand is probably cooling at a faster-than-expected pace.

Similarly, the Energy Information Administration (EIA) has reported inventory build for five consecutive weeks, with a total 40.95 million barrels adding to the stockpiles (chart below). The institution will release its latest weekly data today, in which the market foresees a 1.5-million-barrel dropas refiners are speeding up operating after extreme cold weather swept the country in February.

On the positive side, China NBS released upbeat manufacturing and non-manufacturing PMI data on Wednesday morning, underpinning growth momentum of the world’s second-largest economy. This Friday’s release of US nonfarm payrolls data will be closely watched by traders too, as the figure may affect market’s perception of the Fed’s interest rate path. Investors are foreseeing 655k new jobs added to the labor market in March as the economy continues to recover from the pandemic. While ahigher-than-expected reading may point to a brighter energy demand outlook, the resulting stronger US Dollar may weigh on commodity prices.

Technically, WTI retreated from the 200% Fibonacci extension level of 66.50 and entered a technical correction. A few large bearish candlesticks point to strong selling pressure and may signal a trend reversal. Prices broke the 20-day Simple Moving Average (SMA) line and is looking at the 20-day SMA line for support.

A daily close below the 50-day SMA (59.67) would likely intensify near-term selling pressure and carve a path for price to test a key support level at 58.29 (the 127.2% Fibonacci extension). The MACD indicator has formed a bearish cross over and trended lower since, underscoring bearish momentum.

We typically take a contrarian view to crowd sentiment, and the fact traders are leaning heavily to the long side suggests that oil prices may continue to fall.

Traders are further net-long than yesterday but less net-long from last week, and the combination of current sentiment and recent changes gives us a further mixed oil trading bias.