WTI is rangebound around $74.00 despite escalating recession concerns

In the early Tokyo session, West Texas Intermediate (WTI) futures on NYMEX are fluctuating in a limited range around $74.00. The oil price is fighting to acquire a direction after a straight decline to about $73.00 from the important resistance of $81.00.

Despite the publication of reliable United States Automatic Data Processing (ADP) Employment Change data, the black gold remained hidden in the woods. According to the organization, the United States economy has generated fresh 235K vs. the forecasts of 150K and the earlier release of 127K.

Solid payroll data from the United States is a double-edged sword for the oil price. No doubt, bigger demand for labor force is often essential to cater to bumper demand from companies to address operations, which displays a spectacular requirement of oil to execute operations. On the other hand, a tight US labor market will be hampered by greater wage inflation, which would leave the Federal Reserve (Fed) with no room to consider slowing the rate of policy tightening until the end of CY2023 and could spark recession fears.

TD Securities analysts noted in their analysis of the Federal Reserve's December policy meeting minutes that officials were largely in agreement about the need to tighten monetary policy in the near future. Therefore, it anticipates a rate increase of 50 basis points (bps) in February, followed by rate increases of 25 bps in March and May. It is anticipated that the Fed will agree on a target range for the Fed funds rate between 5.25 and 5.50 percent by May."

Meanwhile, a considerable pace adopted by the Chinese administration in reopening the economy for spurting the volume of economic activity has resulted in an upside revision of Gross Domestic Product (GDP) predictions. The National Bureau of Statistics increased China's real GDP growth for 2021 from 8.1% to 8.4%, providing a stronger comparison base for 2022. This could result in a future increase in oil prices.