WTI: Depressed above $40 amid output cut talks
- WTI defies the late-Friday recovery moves while slipping from $40.80.
- Saudi Arabia pushes for two million barrels a day output cut, IEA improves on oil demand forecast.
- Risk-tone remains mildly positive amid virus woes, US-China tension.
WTI drops to $40.45 during the early Monday morning in Asia. The energy benchmark recently weakened amid hopes of easing the global production cut. However, mildly positive trading sentiment joins the International Energy Agency’s (IEA) upbeat forecast to challenge the bears.
Saudi Arabia leads the group of Organization of the Petroleum Exporting Countries and its Russia-led allies, known as OPEC+, to convey wishes of output cut citing expected recoveries in global fuel demand. The Arab nation proposes the two million barrels a day output cut to the current 9.7 million barrels a day reduction in the production.
The news might have taken clues from the latest IEA demand forecast for 2020. The institute’s July month report said, “the IEA estimates that global oil demand this year will average 92.1 million barrels per day, down by 7.9 million barrels per day versus 2019, a slightly smaller decline than forecast in the last report.”
Though, hopes of further stimulus from the US joins the ramping up of the economic activities in Asia, despite the coronavirus (COVID-19) outbreak, helps the bulls to remain optimistic. Also, talks that the much-championed drug Remdesivir gave further positive results during the clinical trials offered additional support to the risk-tone.
As a result, the S&P 500 Futures attack June month high while gaining 0.46% to 3,194 as we write. Also, the US 10-year Treasury yields remain positive near 0.64% by the press time.
It’s worth mentioning that a light calendar could keep the energy traders look for fresh updates concerning the virus and the US-China tension for near-term direction. Should the risk-on mood defies, which is more likely, the energy benchmark can slip below $40.00 threshold.
Technical analysis
Unless closing beyond a three-week-old falling trend line, currently near $40.95, energy buyers are less likely to attack the monthly top $41.13. On the contrary, $40.00 and 21-day SMA around $39.70 can restrict the black gold’s short-term downside.
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.
