WTI faces rejection at key hurdle despite decline in US inventories

• WTI surrenders gains after facing rejection at key trendline hurdle. 
• Fears that OPEC+ may ease output cuts look to be capping the upside. 

West Texas Intermediate (WTI) oil is currently trading largely unchanged on the day at $40.50 per barrel, having failed to take out resistance at $40.86 early Tuesday. That level is housing the trendline connecting June 23 and June 8 highs. 

The black gold rose nearly 0.5% on Tuesday, as US crude inventories fell by 8.3 million barrels in the week to July 10, beating analysts’ expectations for a decline of 2.1 million barrels. However, the recovery from $39 ran out of the steam at the trendline hurdle early Tuesday, possibly due to fears that the OPEC+, a group of major producers led by Saudi Arabia and Russia, may decide to raise output on Wednesday. 

Key members of OPEC and allies including Russia, a group known as OPEC+, are set to decide whether to extend output cuts of 9.7 million barrels per day (bpd) that end in July or ease them to 7.7 million bpd, according to Reuters. A taper cannot be ruled out, as oil prices have quadrupled since hitting lows below $10 in April. 

“OPEC+ decision on production cut tapering will set the tone for the oil market,” ANZ Research said in a note, according to Reuters. 

A bigger-than-expected taper will likely yield a notable price pullback, more so, as the resurgence of coronavirus in the US is derailing reopening plans. 

Technical levels