Oil prices have recovered sharply amid a drop in oil inventories and in anticipation of sanctions on Russia. (Pivot Orderbook analysis)

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• Oil prices have recovered sharply amid a drop in oil inventories and in anticipation of sanctions on Russia.
• Investors have shrugged off headlines of an additional oil supply of 15 million barrels from the US SPR.
• The black gold may face headwinds from unchanged PBOC policy and upbeat yields.

The pair currently trades last at 85.48.

The previous day high was 84.92 while the previous day low was 81.65. The daily 38.2% Fib levels comes at 83.67, expected to provide support. Similarly, the daily 61.8% fib level is at 82.9, expected to provide support.

West Texas Intermediate (WTI), futures on NYMEX, have soared as a drawdown in crude oil stockpiles, reported by the Energy Information Administration (EIA) on Wednesday, returned optimism. The oil prices have extended their gains above the critical resistance of $85.00 to near $85.57 in the early European session.

On Wednesday, the EIA reported a drop in oil inventories by 1.725M barrels vs. expectations of an increment of 1.38M and the prior release of 9.88M. A surprise decline in oil stockpiles has infused optimism in the black gold, defended the pessimism from the oil release announcement by US President Joe Biden. US Biden announced a release of 15 million barrels from the Strategic Petroleum Reserve (SPR) to balance out the demand-supply mechanism.

Optimism in oil prices is also backed by anticipation of further sanctions on the oil supply from Russia, which may cripple the global oil supply.

On a broader note, headwinds for oil prices are far from over. An unchanged monetary policy by the People’s Bank of China (PBOC) may bring pessimism to black gold. Despite the economic turmoil due to the continuation of the zero-Covid-19 policy and vulnerable real estate demand, PBOC kept its Prime Lending Rates (PLR) unchanged. An absence of further monetary policy may impact the sentiment of the market participants.

Meanwhile, the US dollar index (DXY) has dropped sharply and has printed an intraday low of 112.77 as the risk aversion theme has faded. S&P500 futures have recovered their entire overnight losses amid a rebound in the risk-on market mood. Returns on 10-year US Treasuries are still solid.

Technical Levels: Supports and Resistances

XTIUSD currently trading at 85.48 at the time of writing. Pair opened at 84.65 and is trading with a change of 0.98 % .

The pair is trading above its 20 Daily moving average @ 84.17, below its 50 Daily moving average @ 86.69 , below its 100 Daily moving average @ 94.83 and below its 200 Daily moving average @ 97.27

The previous day high was 84.92 while the previous day low was 81.65. The daily 38.2% Fib levels comes at 83.67, expected to provide support. Similarly, the daily 61.8% fib level is at 82.9, expected to provide support.

Note the levels of interest below:

• Pivot support is noted at 82.56, 80.47, 79.29
• Pivot resistance is noted at 85.83, 87.01, 89.09

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