- WTI bulls relentless ahead of this Tuesday’s June expiry.
- Demand growth hopes, voluntary output cuts underpin.
- Global recession fears, US-China tensions could likely weigh.
Heading into the expiry week, WTI (June futures on Nymex) bulls show little sign of nervousness when compared to the May contract expiry carnage.
The US oil extended the four-day winning streak and went to hit fresh nine-week high highs at 31.24 before retracing slightly in the last minutes. At the time of writing, WTI trades around 31.00, still gaining 4.75% on a daily basis.
The bullish momentum in oil can be mainly attributed to optimism over the oil demand recovery, as the global economies ease lockdown restrictions and business sector activity show some signs of revival.
Further, expectations of falling global oil supplies, in light of the oil output cuts and surprise draw in the US crude inventories, also underpin the sentiment around the black gold. Last week, Oman and Nigeria joined in Saudi Arabia, Kuwait and UAE in voluntary oil output cuts.
Meanwhile, the buyers also remain hopeful after the International Energy Agency (IEA) offered an upbeat outlook on global oil markets in its monthly oil market report. Further, broad dollar weakness amid improved risk tone boosts the higher-yielding oil.
However, the growing US-China tensions over the coronavirus mishandling combined with deepening global economic contraction fears could limit the bull’s strength for additional upside.
Also, attention will gradually shift towards Tuesday’s June contraction expiry, with the CFTC having already warned over of negative oil prices again as witnessed during last month’s expiry. Although there is no sign so far of the rates duplicating the previous moves.
WTI technical levels to watch
To the upside, the immediate resistance awaits at 31.75 (classic daily R3), above which the 32 handle will be tested. On the flip side, the daily pivot point at 30.21 will be on the sellers’ radar en route Friday’s low of 29.61.
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