WTI pressured below short term bearish trendline in CPI induced risk-off markets

• WTI presses up against key resistance near $88.00. 
• The bulls eye a break of trendline resistance and eye $90.00.

West Texas Intermediate, WTI is under pressure following a hot inflation report in the US that has sent markets into a tailspin. At the time of writing, WTI is down around 0.6% having fallen from a high of $88.02 to a low of $85.58. 

Before the CPI print, the price of oil was already under pressure due to the International Energy Agency (IEA) that has warned last week’s two-million-barrel-per-day production cut by OPEC+ threatened to tip the global economy into recession. The agency has it lowered its demand forecast for the remainder of this year and 2023. In its influential monthly Oil Market Report, the IEA said OPEC+ supply cuts “may prove the tipping point for a global economy already on the brink of recession.” 

Meanwhile, analysts at TD Securities have argued that, ”fundamentally, energy supply risks are rising, with an Iran deal off the table, Russian production starting to slump at a faster clip, the US SPR releases set to grind to a halt and EU sanctions on Russian crude coming to effect this December.”

”With diesel cracks at their highest levels in several decades and gasoline cracks soaring, demand has outperformed expectations. Chinese mobility as measured by our tracking of road traffic for the top 15 cities by vehicle registrations also suggests that Chinese demand is firming once more. The right tail in energy prices is still fat.”

US CPI comes in hotter

In the United States reported inflation rose at a higher-than-expected pace in September, with prices climbing by an annualized 8.2% last month, down from August’s 8.3% rise but above the consensus analyst forecast for an 8.1% increase.

The data arrived as follows:

• US CPI (MoM) Sep: 0.4% (est 0.2%; prev 0.1%).
• US CPI (Y0Y) Sep: 8.2% (est 8.1%; prev 8.3%).
• US CPI Core (M0M) Sep: 0.6% (est 0.2%; prev 0.6%).
• US CPI Core (Y0Y) Sep: 6.6% (est 6.5%; prev 6.3%).

The report is likely to firm the Federal Reserve’s hawkish monetary policy stance and lead to more interest-rate hikes as the central bank looks to slow the US economy, raising recession risks. 

WTI technical analysis

The price is trying to break the downside trendline leaving a W-formation behind which is a bearish formation on a downtrend, but it could lead to a bullish breakout if the bulls commit to support, as highlighted in the above chart with eyes on $90.00bbls.