WTI consolidates Wednesday’s 5% drop around $38

• WTI looks heavy amid renewed virus woes, record US crude stocks.
• Risk-off mood extends into Asia on virus risks and trade wars.
• IMF cuts global economic outlook, adds to the oil-price weakness.

WTI (August futures on Nymex) is in a phase of bearish consolidation, as it wavers around the 38 handle in early Asian trading.

The US oil licks its wounds following a 5% drop from a new three-month top of 41.63 seen on Wednesday after the bears fought back control amid a broad risk-aversion wave and bearish Energy Information Administration’s (EIA) US crude stocks report.

The sentiment around the black gold was dented by the intensify fears over the second-wave of coronavirus globally, with the cases rising dramatically in the US, Germany and Latin America. The coronavirus resurgence knocked-off the optimism on the economic recovery narrative, eventually weighing on the oil demand outlook.

Further, the EIA data showed that the US crude oil inventories expanded last week by 1.4 million barrels, exceeding expectations for a 299,000-barrel rise and marking the third straight record for crude in US storage. The record US crude stocks reinforced oversupply fears and collaborated with the downside in the prices.

Meanwhile, the 2020 global growth forecast downgrade by the International Monetary Fund (IMF) and renewed US-EU trade war exacerbated the pain in the higher-yielding oil.

Reports that tankers carrying nearly two months’ worth of Venezuelan oil output are stuck at sea, however, could offer some temporary reprieve to the WTI bulls. Global refiners shunned the Venezuelan crude to avoid falling foul of US sanction, per Reuters.

Looking ahead, the risk sentiment will continue to dominate the oil-price action while the virus stats and trade war developments will be also closely eyed.

WTI technical levels to watch

With a failure to hold above the 10-DMA at 38.34, the bears are flirting with the 20-DMA support at 37.79. A sustained break below the last would open floors towards the 37 mark. On the flip side, acceptance above the 10-DMA could call for a re-test of the 39.50 level, where the 5-DMA coincides. Further north, the 40 barrier could be back into play.

WTI additional levels