WTI slips below $34.00 amid risk reset in early Asia

• WTI fails to keep the previous day’s recovery moves from $31.33.
• Market’s risk-tone gets heavy amid fears of an escalation in the US-China tension.
• Hopes of extension in output cuts, market optimism countered EIA data on Thursday.
• US President Trump’s China conference becomes the key.

WTI extends its declines from $34.34 to $33.56 amid the initial Asian session on Friday. In doing so, the oil benchmark probes the previous day’s recovery moves amid the market’s cautious sentiment.

With US President Donald Trump’s calling of China conference trader fear further sanction on the Asian major as the Republican leader has already signaled such a move during the early week. The cautious sentiment also gains strength after the House of Representatives has passed a bill to levy sanctions on the diplomats from Beijing involved in the Xinjiang case.

Against this backdrop, the US 10-year Treasury yields dropped two basis points (bps) to 0.684% after staying positive near 0.70% on Thursday. Further portraying the risk-off sentiment is Japan’s NIKKEI that is down 0.30% to 21,845 amid the initial minutes of Tokyo open.

It should also be noted that the barrel of the black gold earlier cheered gains of global equities, backed by hopes of further stimulus, while paying a little heed to the weekly official Crude Oil Stocks Change from the Energy Information Administration (EIA). As per the release, the inventories rose 7.928 million barrels versus expected fall of 1.944 million barrels. Furthermore, the Reuters’ news suggesting likely extension of the global production-cut accord to December, than previously agreed June, also helped please the oil bulls.

Considering the lack of any major oil-specific data, except for the weekly Baker Hughes US Oil Rig Count, market players will keep eyes on the risk catalysts surrounding China for fresh impulse.

Technical analysis

A short-term falling trend line near $34.25, followed by the monthly top of $34.90 and $35.00 round-figure, could keep the bulls chained. However, a daily closing below the confluence of 21 and 50-day EMA near $30.00-29.90 might continue restricting the quote’s near-term downside.