WTI sheds nearly 4% amid coronavirus-led demand woes, eyes on $51
- WTI sold into coronavirus risks on oil demand, firmer US dollar.
- Risk-off remains at full steam, weighs on higher-yielding oil.
- All eyes on virus update and US weekly Crude Stocks data.
WTI (oil futures on NYMEX) remains heavily offered in Monday’s European trading, flirting with a new four-day low reached at 51.37 in the last hour.
WTI: Downside appears more compelling
The corrective slide in oil from a three-week high of 54.50 gathers steam for the second straight session today, as the coronavirus contagion rapidly spreading outside China heightened concerns over its impact on demand for oil and its products.
The number of new coronavirus cases and deaths reported in Iran, Italy and South Korea have risen over the weekend and alarmed investors over the rising contagion risks. This prompted a meltdown in the global equities and sent investors scurrying for safety in gold and the US dollar, as they dumped the higher-yielding assets such as oil.
Moreover, the relentless buying in the US dollar across its main competitors amid increased haven flows also adds to the weakness in the black gold. A stronger greenback makes the USD-denominated oil expensive for foreign buyers.
Further, an increase in the US oil rigs counts also collaborates with the bearish sentiment around the barrel of WTI. “Drillers added one oil rig last week, bringing the total count to 679, the highest since the week of Dec. 20, energy services firm Baker Hughes Co said”, as cited by Reuters.
Markets will continue to watch for fresh coronavirus-related headlines and the USD dynamics for near-term trading impetus ahead of the US weekly crude stockpiles data releases later in the week.
WTI Technical levels to consider
“First resistance at 5220/30 should be quite strong but above here 5270/80 & resistance at 5300/20. If we unexpectedly continue higher look for 5340/50. A break above 5370 targets 5385/90 & 5405/10 before the high at 5460/66. Gains are likely to be limited as we head in to overbought conditions but we could reach 5490/5500. Holding below 5220/30 retests minor support at 5160/50. On further losses look for a retest of last week's low at 5125/15. A break lower targets 5075/65,” Jason Sen at DayTradeIdeas explains.