- Energy buyers emphasize fresh trade tensions between the US and China.
- US-Iran tussle and OPEC+ production cuts limit heavy declines.
- API data and trade/political headlines will be in the spotlight.
Following its failure to cross 200-day moving average, WTI witnesses pullback to $57.50 during early Tuesday.
Optimism surrounding the US economy, mainly basis on Friday’s upbeat employment report, failed to last long as media releases from the US and China continue to tame the odds favoring a trade deal between the world’s two largest economies. The latest red signals include China’s top official’s warning of destruction to the US if it considers the dragon nation an enemy and the US Commerce Departments announcement to collect extra reserves from importers of Chinese and Mexican structural steel.
However, geopolitical tension between the US and Iran, coupled with oil production cut extension by the Organization of the Petroleum Exporting Countries (OPEC) and its allies popularly known as OPEC+, limited the black gold’s downpour.
Iran recently announced to waive rich uranium limits set under the nuclear deal while forcing the global powers to accept the 2015 agreement. The US, on the other hand, continues to push France and other global powers to restrict the nuclear powers Iran may use.
Looking forward, a weekly release of the US oil stocks change by a private industry survey the American Petroleum Institute (API) will offer an immediate catalyst to follow while trade /political headlines can keep dominating the price momentum. The API inventories last shrank 5 million barrels for the week ended on June 28.
Technical Talks
FXStreet Analyst, Ross J Burland, says that the energy benchmark is on the verge of a breakout:
From a technical standpoint, WTI is being squeezed into a tight spot and a break-out is due either side of the 58 handle. Price continues to trade between the 38.2% Fibo of the daily swing lows and highs and around the 20, 50 and 200 Experiential Moving Averages. On a break to the upside, beyond the trend line resistance, prices can rise to 60 level. Below the weekly lows at 56.77, the 52 handle and then the 14th Jan 50.41 lows ahead of the 26th November lows at 49.44 are in sight.
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