- Oil prices see fresh selling in Asia despite trade optimism.
- Dollar comeback continues to weigh on the black gold.
- Focus on trade developments and API Crude Stocks data for next direction.
WTI (oil futures on NYMEX) came under fresh selling pressure in the Asian trading, breaking the latest consolidative mode to the downside, as the bears now look to test the $ 56 support amid re-emergence of global growth concerns after the Asian PMI surveys disappointed.
Global growth concerns back in play
Fresh global growth concerns seem to overshadow the latest upbeat trade headlines induced risk-on sentiment, in turn weighing negatively on the higher-yielding oil. Hong Kong Markit PMI fell to the lowest since 2008 while the Singapore Markit PMI also slipped further into contraction in October. Mounting global economic slowdown worries raise doubts over the global oil demand growth and render oil-negative.
Meanwhile, the overnight $ 1 drop in the black gold can be mainly attributed to the broad-based US dollar comeback, as investors resorted to closing out their USD short positions after five straight days of losses and ahead of the key US ISM Services PMI data release. A stronger greenback makes the USD-denominated oil more expensive for the holders in foreign currencies.
However, the downside may remain cushioned amid fresh trade positive headlines that cited the US is considering removing the previously imposed tariffs on the Chinese goods to go ahead with the signing of the Phase One of the deal. Moreover, the renewed geopolitical tensions between the US and Iran could also underpin the sentiment around the barrel of WTI. The US-Iran conflict could trigger supply disruption risks from OPEC’s no 2-oil exporter, Iran.
Looking ahead, the prices will take fresh cues from the broader market sentiment amid ongoing US-China trade developments and upcoming US Services PMI releases. Also, in focus remains the US weekly Crude Stocks data from the American Petroleum Institute (API) due later on Tuesday for the next direction in oil.
WTI Levels to watch
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