WTI: Firmer above $42 amid risk-on mood, falling Saudi oil exports
- WTI extends recovery above $42 amid a better market mood.
- Upbeat earnings offset US-China woes and lift risk appetite.
- Demand recovery concerns persist alongside the virus surge.
WTI (futures on Nymex) has picked up fresh bids in the European session and looks to retest the four-month highs of $42.51, underpinned by the risk-on market profile.
The appetite for risk assets returned in Europe, as the upbeat earnings combined with the coronavirus vaccine hopes offset concerns over the US-China escalation. Therefore, the buying interest around the higher-yielding oil remerged.
The safe-haven demand for the US dollar weakened again amid the upbeat market mood and in turn rendered positive for the USD-denominated oil. A weaker greenback makes the USD-sensitive oil cheaper to foreign buyers.
Further, oil bulls also cheered the massive fall in Saudi Arabia’s oil exports in the month of May. According to the official data, the Kingdom’s oil exports plunged 65% in the reported month. Note that Saudi is the OPEC’s no.1 oil exporter.
The bulls, however, struggle to extend the upside, as fresh coronavirus lockdowns and the resultant impact on the fuel demand continue to cap the gains in oil. Meanwhile, an unexpected rise in the US crude inventories could also remain a drag on the prices.
The Energy Information Administration (EIA) data showed that the US crude inventories rose by 4.9 million barrels in the week to July 17 to 536.6 million barrels vs. expectations for a 2.1 million-barrel drop.
WTI technical levels to watch
“Tuesday’s top near $42.52 joins $42.00 to limit the quote’s nearby advances ahead of the said bearish pattern’s resistance-line, at $42.60 now. In a case where the oil prices remain strong beyond $42.60, February month low near $44.00 could regain market attention. Other than an ascending trend line since June 15, at $40.60 now, a 21-day SMA level around $40.40 and $40.00 round-figure will also be the key to follow for fresh short positions,” explains Anil Panchal, FXStreet’s Analyst.
WTI additional levels