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  • Risk sentiment turns sour, triggers fresh selling in WTI.
  • Virus fears outweigh US crude stocks draw, NFP optimism.
  • US oil still remains on track to book a weekly gain.

Having faced rejection near $40.50 on several occasions so far this Friday, WTI (August futures on Nymex) drops nearly 1.50% in the European session, now attacking the 40 level.  

The bears are back in control after the US oil failed several attempts to sustain at higher levels. Despite the weakness, the black gold remains on the track to book a weekly gain.

The sentiment turned bearish on WTI along with the appetite for the risk/ higher-yielding assets, as growing concerns over the record rise in the coronavirus cases across the US dampen the market mood.   

The virus fears overshadow the optimism fuelled by the stronger US NFP report and weekly crude stockpiles drawdown. The EIA data showed that the US crude stockpiles fell 7.2 million barrels from a record high last week, far more than analysts had expected, per Reuters.

Souring risk sentiment fuelled rebound in the US dollar also adds to the weight on the barrel of WTI. A firmer greenback makes the dollar-denominated oil expensive for foreign buyers.

In the day ahead, the losses could remain capped by increased economic recovery hopes, especially China’s services sector expanded at the fastest pace in over a decade in June.

Further, the reports that the OPEC oil production fell to its lowest in decades in June and Russian production has dropped near its OPEC+ target could also offer some reprieve to the bulls.

WTI technical levels to watch

“Sellers seek entries below $40.20 to target the late-June month’s low near $37.18. However, a confluence of 200-HMA and 50% Fibonacci retracement of June 23-25 fall, around $39.40, might question the bears. Alternatively, $40.60 and $40.80 can offer nearby resistances during the quote’s U-turn. Though, the mentioned bearish pattern’s resistance line, at $41.27 now, could trigger a pullback,” FXStreet’s Analyst Anil Panchal noted.

WTI additional levels