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  • Rebound in US yields, dollar triggers fresh selling amid cautious markets.
  • Focus on US jobs data as recent weak fundamentals continue to dent oil prices.

Despite full markets returning, WTI (futures on Nymex) remains  under pressure in Europe, having broken its Asian consolidation to the downside, as the bears tested the 56.30 levels and remain on track for a weekly loss.

The black gold remains offered amid a broad-based US dollar comeback in tandem with the Treasury yields, as investors resorted to positioning ahead of the US labor market report. A stronger US dollar makes the USD-denominated oil more expensive for the foreign buyers while higher US yields dull the attractiveness of oil as an alternative higher yielding asset.  

Moreover, a sharp drop in the German factory orders combined with the recent downbeat US and UK economic data re-ignite global economic slowdown fears and weigh negatively on the oil demand outlook, which in turn renders oil negative. In addition, markets weigh in a smaller-than-expected drop in the US Energy Information Administration  (EIA) crude inventories.

However, the downside continues to find some cushion amid the OPEC+ supply cuts extension and rife Iranian geopolitical tensions. Alfonso Esparza, Senior Analyst at OANDA notes: “The OPEC+ deal will keep prices from falling too hard, but there must be an end to trade protectionism to assure the demand for energy products recovers.”

All eyes now remain on the US Non-farm Payrolls release for fresh direction on the US dollar, which will eventually impact the barrel of WTI moves.

Levels to watch