WTI drops over 0.5% as dollar rises in risk-off trade

West Texas Intermediate (WTI) crude, a North American benchmark for oil, is flashing red on Monday with the American dollar drawing bids amid risk-off trade in the US stock futures. 

At press time, a barrel of WTI is changing hands at $40.32, representing a 0.6% decline on the day. Meanwhile, the dollar index (DXY), which tracks the value of the greenback against majors, is trading 0.14% higher on the day at 96.15. 

The S&P 500 futures are down 0.36% and pushing the safe-haven dollar higher with the European leaders struggling to hammer out a post-coronavirus economic recovery plan. The European Union Summit scheduled on Friday to iron out differences between the member nations on size and scope of the recovery plan was extended to an unscheduled third day on Sunday. So far, the impasse remains unbroken. 

Apart from the Intermarket factors, a recent decision by the OPEC+, a group of major producers led by Saudi Arabia and Russia, to boost supplies by 2 million barrels per day could be hurting the black gold. The cartel forecast that that oil demand would grow, compensating for the increased supply. So far, however, the bullish demand forecast has failed to put a strong bid under oil. 

Looking ahead, the black gold could continue to take cues from the US dollar and equity markets. Also, newsflow related to Saudi King Salman's health may affect prices. 

Traders would also keep an eye on the talk of additional fiscal stimulus in the US. The Congress is set to begin debating a new aid package this week to help the economy absorb the shock arising from the second wave of the coronavirus outbreak. 

Technical levels