- WTI pulls back from eight-day high amid fresh risk aversion.
- US-China trade war fears, worrisome catalysts concerning Japan exert immediate downside pressure.
- Baker Hughes US Oil Rig Count and trade/virus updates will be the key.
Despite staying near an eight-day top, NYMEX WTI Futures for June slips below $20.00 with an intraday low of $18.50, still up 6.20% on a day, amid the Asian session on Friday. The oil benchmark trades near $19.85 by the press time.
Although month-start buying, after the heavy fall in April, seems to have helped the early-day run-up, the recent declines have likely taken clues from US President Donald Trump’s comments. Also expected to have negatively affected the oil prices are downbeat growth forecasts for Japan as well as expectations of emergency extension in the Asian economy.
Adding to his previous worrisome comments concerning the US-China trade relations, US President Trump recently warned that he could use tariffs on China.
The fresh fears concerning a trade war between the world’s two largest economies could have severe impacts on the global economy which is still jostling with the coronavirus (COVID-19) crisis. Hence, the market’s risk-tone pays a higher homage to the catalyst.
In the case of Japan, PM Shinzo Abe is expected to extend the national emergencies whereas the NIKKEI survey suggests the nation’s GDP drop to World War II levels during Q2 2020.
It should also be noted that recently released downbeat inflation figures from Japan, as well as pessimistic forecasts concerning the oil demand by Morgan Stanley, also weigh on the black gold.
On the positive side, the global oil producers’ accord to cut the daily output by 9.7 million barrels a day comes in to effect from today. Also providing additional support to the bulls could be Norway’s extra production cut and optimism surrounding economic re-start in Europe and the US.
Looking forward, oil traders may want to wait for the weekly Baker Hughes US Oil Rig Count, prior 378, amid the lack of storage capacity and rush to close the units after the April month’s plunge.
Technical analysis
The April 21 high near $22.60 is the immediate upside barrier to tackle for the oil benchmark to aim for the previous month top close to $29.15/20. However, a sustained trading below $20.00 keeps the risk of return of the $10 mark on the cards.
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