WTI struggles to preserve modest intraday gains amid mixed fundamental cues.
Hopes for a US-China trade deal and a weaker USD lend support to the commodity.
Oversupply concerns cap gains for the black liquid and warrants caution for bulls.
West Texas Intermediate (WTI) US Crude Oil prices struggles to capitalize on its modest intraday move up and drops to a fresh daily low, close to mid-$58.00s during the first half of the European session on Friday. The commodity, for now, seems to have stalled its recovery from from the vicinity of the $56.00 mark, or a three-week low touched on Thursday.
Hopes for the potential de-escalation of a bitter trade war between the US and China – the world's two largest economies – help ease fuel demand concerns. Apart from this, US President Donald Trump's threat to impose secondary sanctions against any country buying Iranian oil turns out to be a key factor underpinning the black liquid. Furthermore, a modest USD pullback from a multi-week high further lends support to Crude Oil prices, though expectations of more OPEC+ supply coming to the market cap the upside.
From a technical perspective, the commodity last week faced rejection near a horizontal support breakpoint, now turned a hurdle near the $65.00 level. The subsequent downfall and negative oscillators on the daily chart favor bearish traders, suggesting that the path of least resistance for Crude Oil prices is to the downside. That said, repeated failures to find acceptance below the $58.00 mark warrant some caution before placing fresh bearish bets around the commodity and positioning for any further depreciation.
However, a convincing break and daily close below the aforementioned handle could drag Crude Oil prices back below the $57.00 round figure, towards retesting the overnight swing low near the $56.60 area. Some follow-through will reaffirm the near-term negative bias and expose a multi-year trough – levels below the $55.00 psychological mark touched in April.
On the flip side, momentum beyond the daily swing high, around the $59.55 region, could trigger a short-covering rally and allow Crude Oil prices to reclaim the $60.00 psychological mark. The momentum could extend further, though it runs the risk of fizzling out rather quickly near the $60.80-$60.85 region. This is closely followed by the $61.00 round figure, which if cleared should pave the way for a move towards the $62.00 mark en route to the $62.50 area and the $63.00 round figure.
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