WTI drops over 2.0% amid downbeat trading sentiment in early Asia

WTI drops to $35.80 amid the early Asian session on Monday. The oil benchmark offered a gap-down opening of $36.11 that extended till the intraday low, so far, of $35.60 before bouncing back a bit. The black gold’s initial fall could be attributed to the market’s broad risk-off mood, the recent pullback might have taken clues from upbeat comments by the Iraqi Oil Minister.

With the surge in the coronavirus (COVID-19) cases in the US, Tokyo and some parts of Beijing, the markets previous risk aversion got a boost at the week’s start. Also supporting the risk aversion wave could be protests in the US.

On the positive side, Iraq’s newly appointed oil minister Ihsan Abdul Jabbar Ismail uttered upbeat statements relating to the oil prices during the interview with Iraq’s Sharqiya TV at the weekend. The diplomat anticipates oil prices to cross $40 during the second half of 2020 while also suggesting an average of 2.8 million barrels per day (bps) of exports in June. The official also praised the OPEC+ output cut accord, which in turn suggests the country’s support for a few more of them in the future.

It should also be noted that the week’s oil rig counts, as suggested by Baker Hughes, also stood on the positive side for the commodity traders but failed amid the risk-off sentiment. The latest oil rig count figures dropped to 199 from 206 prior. The release marked the 13^th straight fall in the rig counts.

While there is no oil-specific news up on the radar for Monday’s Asian session, China’s Industrial Production and Retail Sales for May could offer immediate direction to the energy prices. As per the forecasts, Industrial Production might recover to 5.0% from 3.9% prior whereas Retail Sales could bounce off -7.5% previous to -2%.

Technical analysis

Unless providing a daily close below 100-day SMA level of $34.65 sellers are less likely to enter a fresh position. As a result, hopes of witnessing $40.00 back on the charts remain alive.