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  • WTI extends pullback from $43.23 to defy the previous day’s run-up.
  • OPEC+ show readiness to follow the output cut amid demand uncertainties.
  • API registered three consecutive inventory draws with -4.4M being the latest.
  • Virus woes, Sino-American tussle weigh on the energy benchmark even if weak US dollar favors the commodities.

WTI sellers attack $43.00, intraday low of $42.90, while flashing 0.24% loss on a day during the pre-European trading on Tuesday. The barrel of black gold recently bears the burden of demand depletion fears following the coronavirus (COVID-19) headlines and news suggesting further tension between the US and China. It should, however, be noted that the quote surged the previous day amid downbeat US dollar and hopes of a further increase in oil supplies.

Reuters came out with the new suggesting that the OPEC+ Technical Committee sees July compliance with oil output cuts at 95% and expects it to reach 97% including Mexico. The news of further demand contrasted the fourth consecutive daily loss, currently fifth, by the US dollar index (DXY) to weigh on the commodity the previous day.

The reason could be traced from the headlines suggesting the Trump administration’s order to blacklist 38 facilities from Huawei after witnessing an abrupt delay in the bi-annual trade deal review with China. On the other hand, Beijing criticizes the American behavior with Hong Kong Leader Carry Lam knocking the World Trade Organization (WTO) over the latest sanctions from the US.

Other than the geopolitics, the coronavirus woes also challenge the energy traders. Even if the latest figures suggest receding strength of the deadly virus in Asia-Pacific and the US, doubts over the testing and surge in new cases from Europe threatens the future commodity demand. Recently, China’s Global Times flashed upbeat news of Beijing being near to the vaccine and will use it strategically.

While the aforementioned catalysts weighed on the risk-tone sentiment and defied the oil bulls, the American Petroleum Institute’s (API) Weekly Crude Oil stock will be the key to watch for fresh impetus. The private inventory number marked third consecutive contraction in the level with -4.4M being the previous reading. Should the stockpile data suggest further weakening, energy prices may take advantage of the greenback’s downside to refresh the monthly top near $43.65.

Technical analysis

Unless breaking $42.40/35 area comprising the monthly support line and 10-day SMA, buyers are less likely to avoid aiming $43.65, a break of which could offer the extra run-up towards February month’s low near $44.00.