WTI: Virus woes, US-China tension probe buyers attacking $40.00
- WTI fades recovery moves from intraday low, still posting three-day winning streak.
- Record low US oil rig counts, OPEC+ performance on the current output cut accord keep buyers’ hopeful.
- Fears of the coronavirus wave 2.0, Sino-American questions the rise.
Despite bouncing off $39.17 at the start of the week’s trading, WTI struggles to break above $40.00, currently around $39.83, during the early Asian session on Monday. The supply-side restrictions are likely favoring the oil benchmark’s latest recovery moves. On the other hand, fears of demand contraction, amid the coronavirus’ (COVID-19) fresh outbreak and trade/political tussle between the US and China, tame the black gold’s upside.
Weekly readings of the Baker Hughes US Oil Rig Counts refreshed the record low of 189 from 199. The reading matches the downtrend established since late-March. Other than the rig counts, global oil producers’ firm follow of the output cut accord also restricts the supply side. Recently, Iraq showed its readiness to comply with the oil production cuts whereas Norway sounds optimistic over the cartel’s impact on oil price recovery.
Considering the demand side, the opening up of major economies seems to push the energy demand and favor the WTI in turn. However, a recent surge in the virus figures from the southern US dampens the trading sentiment. Also negatively affecting the prices could be the Sino-American tension.
During the weekend, the US Department of State signaled that Secretary of State Mike Pompeo discusses the global measures, with allies, against China whereas Bejing turned down the US poultry exports from Tyson. On the positive side, US President Donald Trump stepped back from sanctions on the Chinese diplomats involved on the Xinjiang issue, citing to safeguard the trade deal.
Amid all these catalysts, the market’s risk barometers remain pressured. While citing the same, S&P 500 Futures stay sluggish around 3,050, down 0.25% on a day, as we write.
As there is no major oil-specific news scheduled for publishing in Asia, risk factors will be the key to watch for immediate direction. It should also be noted that the US Chicago Fed National Activity Index for May, prior -16.74, can offer additional details for decision making.
Technical analysis
Buyers await a clear break of the monthly high above $40.60 to fill the early-March gap below $41.22.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
