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  • WTI bulls take a breather ahead of US data, next week’s expiry.
  • Signs of demand revival, voluntary output cuts offer support.  
  • Second coronavirus wave fears, global economic gloom to weigh.           

WTI (June futures on Nymex) looks to extend its correction from six-week highs of 28.75 into the mid-European trading, as the bulls face exhaustion after the 3% intraday rally.

Further, the buyers seem to have turned cautious ahead of next Tuesday’s June-month contract expiry, especially in light of the historic crash seen during the May-month expiry. On Thursday, the CFTC warned of negative oil prices again as we head towards the expiry.

According to Energy Analyst, John Kemp, “WTI Jun futures (CLM0) have around 85 million barrels outstanding with three more trading days before expiry, compared with 149 million barrels at this stage in the May futures (CLK0) contract cycle.”

Also, a profit booking spree cannot be ruled out after the recent rally and ahead of the weekly closing. Rising fears over the second wave of the coronavirus infections and darkening global economic outlook add to the latest leg down in the barrel of WTI.  

The black gold extended the bullish momentum so far this week amid signs of revival for the crude oil demand after China reported increased refinery runs. The US stockpiles witnessed a drawdown while the lockdowns were lifted worldwide.  

Further, Oman and Nigeria joining in Saudi Arabia, Kuwait and UAE for voluntary oil output cuts have also rendered positive for the commodity while the bulls also cheer the IEA’s upbeat outlook on the global oil markets, despite the outlook on falling oil demand.

WTI technical levels to watch

“Bulls may fail on initial attempt at critical barriers at $29.05/10 and $30 as thick falling daily cloud weighs heavily and daily stochastic is overbought, while traders may collect some profits at the end of the week. Consolidation should stay above rising 10DMA ($24.99) to maintain a bullish bias. Break above $30 would generate a strong bullish signal for extension towards $36.08 (50% retracement of $65.63/6.52) and $38.99 (falling 100DMA),” as explained by Slobodan Drvenica at Windsor Brokers.