WTI resumes correction from five-month tops, around $42

The corrective decline in WTI (futures on Nymex) from five-month highs of $43.52 has regained traction in the European session, now knocking-off the rates below the $42 level.

At the press time, the US oil sheds 0.80% to trade at $41.85, breaking the Asian consolidation phase to the downside. The bears fought back control after the minor recovery met supply just above $42.50.

The renewed risk-off wave gripping the European markets seems to have bode ill for the higher-yielding oil, as the haven demand for the US dollar gets a lift. A stronger greenback makes the USD-denominated oil expensive in foreign currencies.

Meanwhile, the coronavirus resurgence and its ongoing negative impact on the global economic recovery, undermine the fuel demand prospects and eventually weigh on the barrel of WTI.

Additionally, oil bears cheer the rise in the US refined product inventories, which outweigh the sharp drawdown in the crude oil stockpiles. The Energy Information Administration
(EIA) data showed distillate stockpiles, which include diesel and heating oil, climbed to a 38-year high and gasoline inventories unexpectedly rose for a second week, per Reuters.

However, the further downside appears cushioned by expectations of disappointing US Jobless Claims data, which could re-ignite the dollar selling across its main peers, benefiting the US oil.

WTI technical levels to watch

“In a case where the energy benchmark manages to conquer $43.75, February month’s low near $44.00 holds the key to the further upside towards March 03 top near $48.75. Alternatively, June month’s top of $41.64 can entertain sellers during the pullback ahead of $40.00 and 50-day SMA level near $39.70. If at all the bears dominate past-$39.70, 50% Fibonacci retracement level of $37.10 will be in focus,” explains Anil Panchal, FXStreet’s Analyst.

WTI additional levels