WTI drops below $40 on demand worries, OPEC+ output increase

• WTI extends slide after closing previous week in red.
• OPEC+ is set to ramp up its output from August.
• Rising coronavirus cases globally revive concerns over demand outlook.

Crude oil prices posted losses last week and seem to be struggling to shake off the bearish pressure on Monday. As of writing, the barrel of West Texas Intermediate (WTI) was trading at $39.85, losing 1.5% on a daily basis.

Eyes on US PMI data

A combination of concerns around an uneven recovery in global oil demand and rising crude oil output forces oil to remain on the back foot at the start of the new week.

The rising number of confirmed coronavirus infections around the globe, especially in several European countries such as Spain and the UK, suggests that the energy demand is likely to remain lacklustre in the second half of the year. On the other hand, OPEC+, which agreed to lower its production by 9.7 million barrels per day (bpd) from May, is set to reduce its output to 7.7 million bpd from August to December.

Later in the day, the ISM Manufacturing PMI will be looked upon for fresh impetus. If the data comes in worse-than-expected and shows a contraction in the manufacturing sector’s economic activity, the WTI could extend its daily slide during the American session.

Technical levels to watch for