WTI retraces last week’s losses to aim for $38.00 amid mild risk-on mood

• WTI kick-starts the week on the positive tone but struggles off-late.
• Vaccine hopes favor market sentiment, fears of oversupply challenge the oil bulls.
• A light calendar keeps room for further consolidation open.

WTI eases from an intraday high of $37.82 to $37.63 amid the initial hour of Tokyo open on Monday. In doing so, the energy benchmark trims the early-day gains while also stabilizing around the multi-day low flashed last week. Although fears of the oversupply and lack of demand dominate, the recent risk reset seems to stop the black gold from declining further.

Another worry for the suppliers…

While the global oil producers are already struggling with the problems to store the commodity, amid a lack of buying and increasing supplies, news that Libya to restore its exports added to the producers’ tension. Having halted its exports for over eight month’s Libya’s commander Khalifa Haftar announced to restore the trading during this weekend. Also likely to disappoint oil traders could be the Energy Information Administration’s (EIA) lowering of the 2020 demand forecast by 210,000 barrels per day. It's worth mentioning that BP is out with its analysis suggesting the early 2020 as oil demand peak whereas Politico's story concerning the likely attack on the US ambassador to South Africa by Iran failed to get any accolades.

Furthermore, the coronavirus (COVID-19) cases are still rising by leaps and bumps, which in turn suggest further hardship for energy demand whereas an end to the driving season in the US also compresses the black hydrocarbon derivative.

Even so, news that AstraZeneca is to restart its third phase vaccine trials and Pfizer is optimistic to deliver the pandemic’s cure by the end of 2020 to the US favor the market’s risk-on mood.

The rumors should be taken with a pinch of salt as the Sino-American tension and Brexit woes continue to challenge the market sentiment.

Against this backdrop, S&P 500 Futures gain 0.75% to 3,348 by the press time while the US 10-year Treasury yields seesaw around 0.66%.

Considering the lack of major data/events on the calendar, traders will keep eyes on the risk catalysts for the fresh impulse. It should also be noted that the OPEC+ meeting on Thursday will be the key for oil traders to watch. “On Thursday, Saudi Arabia and Russia -- the leading members of the alliance -- will chair a monitoring meeting to assess whether the vast production cuts, which they started easing in August, are still staving off an oil glut. New signs of exporters reneging on the deal aren’t helping,” said Bloomberg.

Technical analysis

Unless the quote slips below the 100-day SMA level of $37.35, odds of its further pullback to July month’s low near $38.75 can’t be ruled out.