WTI bears are taking on commitments below $74.00 as bulls run for cover

• WTI bulls could be on the verge of moving on following as strong down move. 
• US recession concerns are playing into financial markets creating a risk-off mood. 

West Texas Intermediate crude is down over 4% on the day so far, falling back into the bearish trend once again and on the front side of what was momentary a counter-trendline. At the time of writing, WTI is trading at $73.80 near the lows of the day having fallen from $77.86. 

Recession worries have reared their ugly head again as traders about a risk-off mood following the start of the week’s US data that fanned the flames of the Federal Reserve’s hawkish narrative in financial markets. On Monday, the Institute for Supply Management (ISM) said its Non-Manufacturing PMI rose to 56.5 last month from 54.4 in October, indicating that the services sector, which accounts for more than two-thirds of US economic activity, remained resilient in the face of rising interest rates. The data beat forecasts that the Non-manufacturing PMI would fall to 53.1.

This has been raising concern the Federal Open Market Committee will potentially stick to the 75 basis point hiking tact when its two-day meeting wraps up on Dec.14, over-shadowing developments that could tighten the market. Concerns about a steep increase in borrowing costs have boosted the US Dollar this year, pressing negatively on US equities and bond markets, with the S&P 500 down 17.5%.

Meanwhile, the Energy Information Administration lifted its forecast for 2023 global oil inventories in its December Short-Term Energy Outlook (STEO), raising its outlook by 0.2-million barrels after expecting a drop of 0.3-million barrels in its November release. The EIA also trimmed its forecast for the average price of Brent crude oil next year to US$92.00, down from its November estimate of US$95.00 on the expectation of a recession in the US.

Meanwhile, the agency took into account the European Union’s ban on seaborne Russian oil imports and the US$60 price cap on Russian crude that came into effect at the start of this week following a decision made on Friday. The cap is expected to tighten supply as Russia looks for alternative buyers.

WTI technical analysis

A prior analysis, that favoured the upside of the market so long as the price remained on the back side of the counter trendline, acknowledged a break below $76.40 that would be putting on some serious heat on the committed bulls as per the following daily and 4-hour charts:

Meanwhile, there are prospects for a correction at this juncture: