WTI drops 1% to $41.50 ahead of US NFP, rigs data

WTI (futures on Nymex) is on a steady decline so far this Friday, undermined by reduced demand for higher-yielding assets amid the renewed US-China tensions induced risk-aversion.

The US oil, currently, drops about 1% to $41.55, extending its weakness into the second straight session. Although the black gold remains on track to book a weekly rise. WTI hit a fresh five-month high at $43.52 earlier this week.

Investors remain wary and stay away from riskier assets such as oil, as the US-China tensions flare-up dents the risk sentiment. The US-China tech war escalated after President Donald Trump signed orders against TikTok and WeChart, in a move to protect from the security threat. China’s Foreign Ministry firmly opposed the US’ action.

Further, the barrel of WTI also faces a double whammy amid risk-aversion, in the wake of the increased demand for the safe-haven US dollar. A stronger greenback makes the USD-denominated oil expensive in foreign currencies.

On the oil market fundamentals, slowing fuel demand recovery amid the resurgence of the coronavirus globally and regional lockdowns adds to the downside in the commodity. The bulls, however, draw support from expectations that the OPEC member Iraq could likely cut oil output further this month.

All eyes now remain on the US NFP report and stimulus talks for fresh cues on the dollar trades, which will eventually impact WTI. Also, the Baker Hughes US oil rigs count data will be closely eyed.

WTI technical levels to watch

“While looking at it, intraday sellers could aim for a 200-bar SMA level of $40.55 as immediate support ahead of $40.00 round-figures. However, an ascending trend line from June 25, currently around $39.55 could challenge the commodity’s further downside. Alternatively, $42.80 and the recent high, also the highest since early-March, of $43.60 will entertain the bulls ahead of highlighting February 2020 low near $44.00,” explains Anil Panchal, FXStreet’s Analyst.

WTI additional levels