WTI drops towards $ 56.50 on rising US supplies, weak Asian factory data

• Record high US output, geopolitical tensions and dwindling Asian factory activity weighs.
• But buyers could find some respite from OPEC cuts and weaker US dollar.

WTI (oil futures on NYMEX) extends its Asian retreat from ahead of the 57 handle into the European trading, as the bears now look to test the 56.50 psychological support.  

The black gold failed to sustain the upbeat US EIA crude inventories report-led rally to 57.40 region and embarked upon a steady decline so far this Thursday, in response to weakening factory sector activity reports from China and Japan while surging US crude production levels combined with escalating geopolitical tensions between India and Pakistan also dampened the sentiment around oil.

On Wednesday, both the sides exchanged fire along their contested border in Kashmir.   Pakistan shot down two Indian warplanes and captured the pilot. The latest update is that India has asked Pakistan to release the pilot unhurt.

Looking ahead, the developments around the Indo-Pak dispute will continue to drive the risk sentiment and eventually the safe-haven bids for dollar, which may have a major bearing on the USD-sensitive oil.

Meanwhile, the ongoing OPEC output cuts and potential supply risks from the US sanctions on Iran and Venezuela could help cushion the downside.

WTI Technical Levels