WTI slumps over 3.50% to fresh three-month lows sub-$38.50

Following a temporary reversal seen on Monday, WTI (futures on Nymex) resumes its downside momentum and hits fresh three-month lows just above $38, shedding nearly 4% so far.

WTI sellers returned along with the risk-aversion on the European markets, as escalating US-China tensions combined with growing coronavirus cases across Europe dent the appetite for riskier assets.

Earlier this Tuesday, the NY Times reported that the US is considering a ban on some of the cotton products from China’s Xinxiang province. Meanwhile, President Donald Trump said he plans to end America’s reliance on the country.

Further, the continued rise in the coronavirus cases globally casts doubts over the strength of the economic recovery, in turn weighing on the prospects for oil demand. Recall that China’s oil imports slowed down last month. The dragon nation is the world’s biggest oil importer.   

The selling bias in the black gold picked up pace after Saudi Arabia made the deepest monthly crude oil price cuts for its Asian customers. Also, unabated demand for the US dollar across its main competitors adds to the weight on the USD-sensitive oil.

Markets now look forward to the sentiment on Wall Street, as full market returns. The next of relevance remains the weekly crude supply reports for a fresh trading impetus.

WTI technical levels to watch

“On the downside, key supports are seen at $38.54 (July 10 low) and $37.08 (June 25 low). Alternatively, resistances are located at $40 (psychological level) and $41.97 (10-day SMA). A close above the 10-day SMA is needed to invalidate the bearish bias,” FXStreet’s Analysts Omkar Godbole explained.

WTI additional levels