WTI crude oil continues to trend lower on its hourly chart, with price testing the channel bottom around $70 per barrel. If this continues to hold as support, a pullback to the channel top at $72 per barrel might follow.

The 100 SMA is still above the 200 SMA to indicate that the path of least resistance is to the upside or that support is more likely to hold than to break. However, price is breaking below the 200 SMA dynamic inflection point, and the gap between the indicators is narrowing to reflect weakening bullish momentum.

RSI is treading sideways close to the oversold region, suggesting that bearish pressure is in play but could weaken soon. Stochastic is on the move down, but the oscillator is approaching the oversold region to reflect exhaustion among sellers.

Crude oil is on weak footing, as traders are anticipating more downside to demand due to the Omicron variant. Some countries like the UK are already declaring emergencies, which might mean another round of restrictions that could hurt business and consumer activity. In turn, this would limit purchases of fuel and energy commodities.

The EIA crude oil inventories report is due next and a slightly larger draw of 1.8 million barrels is eyed versus the earlier reduction of 0.2 million barrels. A surprise build, however, would confirm that demand is already being weighed down by concerns about the Omicron variant.

On the other hand, an even larger than expected reduction to inventories would signal that purchases remain supported or that supply is unable to keep up with demand.

Also note that the upcoming FOMC decision would likely spur additional volatility, as any major swings to sentiment could push commodity prices around. In particular, updates to their economic forecasts and dot plot projection of interest rates could impact risk appetite.