Oil drops to $48.00, eyeing weekly inventory data and FOMC minutes

After rising to a seven-month high on Tuesday, WTI crude oil futures fell to $48.00/barrel mark on Wednesday ahead of the looming official EIA's crude oil inventories data.

On Tuesday, the black gold rose to $48.70 level (highest level since mid-Oct. 2015) after API report showed crude oil inventories fell by 1.14 million barrels during last week further adding to worries over supply disruption led by the Canadian wildfires.

The commodity retreated a bit on Wednesday as investors turn their attention to the release of minutes from April’s FOMC policy meeting. Following hawkish comments from three Fed members on Tuesday, a similar tone in the minutes would resurface speculations of an earlier than expected Fed rate hike, thus pushing the dollar denominated commodities, including crude, lower.

Investors will also confront the release of the official EIA weekly inventory data, where consensus estimates are forecasting a fall of 3.1 million barrels. Nevertheless, crude oil prices are set to witness a volatile session on Wednesday.

Technical levels to watch

A corrective move below $47.70 immediate support has the potential to drag the commodity back towards testing $47.00 resistance turned support handle.

On the flip side, $48.55-60 area now seems to act as immediate resistance, which if conquered would pave way for a further up-move towards the very important $50.00 psychological mark resistance. This $50.00 mark also coincides with 100% Fibonacci expansion level of $27.73-$42.46 up-move and subsequent retracement, and hence, could cap any further up-move in the near-term.