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Oil prices tumbled to 3-month lows on the back of China’s renewed lockdowns (demand) and anxiety over tomorrow’s US CPI print, which has prompted hedge funds to reduce exposure dramatically into what appears more and more a binary outcome.

“The volatility in commodity markets increases the stakes for putting money to work,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.

“The decimation of other commodities has also reduced risk appetite for crude even in a supply-constrained market.”

A surging dollar is also acting as a headwind for oil bulls.

For now, traders are watching API’s inventory data for any signal that could break WTI’s technical levels…

API

• Crude +4.762mm (+1.4mm exp)

• Cushing +298k

• Gasoline +2.927mm (-200k exp)

• Distillates +3.262mm (+900k exp)

API reported inventory builds across both crude and products along with another rise in stocks at Cushing…

Source: Bloomberg

WTI hovered around $95.75 ahead of the API data, just above its 200DMA…

WTI dipped a little on the print then rebounded to unchanged on the data – holding the big losses on the day…

Finally, despite recession fears, several energy agencies agree that supply tightness is set to worsen. IEA’s Executive Director Fatih Birol said nations “might not have seen the worst” of a global energy crunch.

Additionally, hope that Biden will persuade the Saudis to pump more are unlikely  as “International spare capacity estimates have been steadily falling in recent months as OPEC+ has badly undershot their own output targets, despite calls from the Biden administration to increase supply in order to combat high prices at the [gasoline] pump,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.