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  • WTI Futures on NYMEX remain heavy amid US-China trade war fears.
  • Waning demand over the virus outbreak, increasing supply and closing oil rigs portray a mixed scenario.
  • US Factory Orders, EU PMIs can offer intermediate direction while virus/trade updates will remain in the driver’s seat.

WTI Futures for June drops over 7.0% while flashing $18.39 as a quote during the pre-Europe session on Monday. Although the discrepancies between the Demand-Supply matrix have been weighing on the energy benchmark off-late, the recent downside pressure comes from the likely US-China trade war.

Amid the coronavirus-led demand destruction, the black gold fails to sustain US President’s Donald Trump’s allegations suggesting the dragon nation’s intentional barring of information that could have limited the virus outbreak. While backing his claims, US President Trump cites an intelligence report and also threatens to end the US-China trade deal if the later fails to purchase US goods.

As a result, China’s Global Times’ (GT) editor Hu Xijin has to spoil the national holiday and mention allegations as a bluff to foot US voters.

While the risk-off moves help the US dollar to regain its traction, it exerts additional downside pressure on the oil benchmark.

Elsewhere, the OPEC+ output cut accord came into practice during the late last-week and should have helped the oil prices. However, the further shutdown of oil rigs in the US suggests that pessimism is far from over. “US drillers cut 53 oil rigs in the week to May 1, bringing the total count down to 325, the lowest since June 2016, energy services firm Baker Hughes said on Friday,” per Reuters.

Looking forward, the second-tier activity numbers from the European Union (EU) and the US Factory Orders will decorate the calendar and should be watched for intermediate direction. However, trade/virus updates will be the key while going forward.

Technical analysis

Having breached a short-term rising trend channel formation, WTI aims for 61.8% Fibonacci retracement of April 21 slump, around $16.45, ahead of looking towards a 200-HMA level near $15.35. Meanwhile, a horizontal resistance line around $20.50 seems to limit the energy benchmark’s recovery moves above the channel’s support-turned-resistance line, currently around $19.90.