WTI off three-week lows, not out of the woods yet
- WTI bears retain control below $39 mark amid a risk-off mood.
- Spike in coronavirus cases globally stokes oil demand concerns.
- The dollar’s strength will continue to weigh on the US oil.
WTI (futures on NYMEX) has staged a sharp reversal from three-week lows of $38.42, as the bulls fight hard to regain control above the $39 mark.
Despite the pullback, the sentiment around the black gold remains undermined by the resurgent demand concerns for oil and its products, as the key euro area economies enforce fresh lockdowns and stricter restrictions to limit the second wave of the coronavirus contagion. Meanwhile, the US saw the biggest single-day surge in the case on Sunday.
Adding to the pain in the US oil, investors fretted over the prospects of an increase in supply, especially after the Libyan state giant, National Oil Corp, ended its force majeure on exports from two key ports on Friday and said production would reach 1 million barrels per day (bpd) in four week, as cited by Reuters.
Moreover, broad-based US dollar strength, courtesy of the downbeat market mood and the US fiscal stalemate further fuelled the drop in the WTI barrel. A stronger greenback makes the USD-denominated oil more expensive for foreign buyers.
Attentions now remains on the sentiment on Wall Street and fresh virus data from both sides of the Atlantic for fresh trading impetus on the higher-yielding oil.
WTI technical levels
“Oil prices could suffer deeper losses this week. The bearish case would strengthen if prices find acceptance under the immediate support at $39.04 (Oct. 12 low). On the higher side, the horizontal resistance at $41.72 is the level to beat for the bulls,” FXStreet’s Analyst, Omkar Godbole, explained.
WTI additional levels