WTI drops 4% and eyes $32 mark amid risk-off, weakening demand

• WTI downed by falling US demand, risk-off due to US-China woes.
• Oil set for first weekly fall in five weeks, despite broad USD sell-off.
• Focus remains on risk sentiment ahead of Trump’s China presser.

The selling pressure around WTI (July futures on Nymex) accelerates following the break below the 33 level, as bears now target the 32 support zone heading into the key US macro data and US President Donald Trump’s response to the Hong Kong issue.

The US oil sheds 3.50% to trade at 32.60 and remains on track to book the first weekly loss in five weeks. However, the black gold is set to gain a whopping 65% in May, having reversed the crash to the historic lows.

The latest downtick in the barrel of WTI can be mainly attributed to the risk-aversion on the global markets, spurred by the escalating US-China tensions over Hong Kong’s security issue.

The anxiety ahead of Trump’s presser is also keeping the investors off the risky/ higher-yielding assets such as oil. Trump could likely to announce sanctions on the Chinese officials, which could re-ignite a trade war between both countries.

The sentiment around oil also remains undermined by fresh signs of weakening fuel demand, especially from the world’s No. 2 oil consumer, the US. The latest weekly US (Energy Information Administration) crude supplies data showed an unexpected build in the inventories, suggesting lackluster demand for oil and its products.

Meanwhile, broad-based US dollar weakness amid month-end adjustments and OPEC+ output cuts also offer any respite to the oil bulls, as the path of least resistance appears to the downside amid a risk-off market profile.

WTI technical levels to watch

The bears remain in control, with the immediate downside likely to be cushioned at 32.00 (round figure), below which could offer immediate support, below which Thursday’s low of 31.14 could be tested. Any recovery attempts would meet fresh supply around 33 mark (daily pivot point). A sustained break above the latter could open doors towards the 5-DMA barrier at 33.49.

WTI additional levels