WTI Managed to Maintain Bullish Momentum- U.S. Gulf Production Stops!

WTI Crude Oil started the week on the bullish track and remained supportive at around $ 37.68. However, the bullish tone surrounding the crude oil prices could be associated with the reports suggesting another storm in the Gulf of Mexico, which will force rigs to shut down for the second time in less than a month. However, fears of the oversupply and lack of demand could be considered the key factors that are capping any further upside momentum for crude oil. On the contrary, the market risk-on trading sentiment, backed by news suggesting that AstraZeneca will restart their coronavirus (COVID-19) vaccine trials, also supported the oil prices. However, the market risk-on sentiment undermined the broad-based US dollar, contributing to the gains in the oil price, because the oil price is inversely related to the price of the US dollar.

On the negative side, long-lasting concerns about the US-China tussle and uncertainty surrounding the American aid package keep challenging the risk-on sentiment, which might trim any gains in oil. Apart from this, the news that Libya is reinstating its exports also added an extra burden to the crude oil prices. Meanwhile, the downbeat EIA 2020 demand forecast is also keeping the oil traders cautious. WTI Crude Oil is currently trading at 37.45, and consolidating in the range between 37.04 and 37.68.

The tropical Storm Sally is heading towards the Gulf of Mexico at quite a pace, and it is forecast to be a category two hurricane. Let me remind you that this is the second weather disruption to oil production in less than a month, with Hurricane Laura forcing shutdowns less than 3-weeks earlier. Sally is expected to make landfall near New Orleans on Tuesday. This, in turn, helped the oil prices to put in some modest bids on the day.

Moreover, the news that Libya is to restore its exports also keeps challenging any gains in the crude oil prices. The military commander is seeking to remove Libya’s United Nations-backed government and let its oil industry reopen after an 8-month pause. As per the keyword, Khalifa Haftar presented his “personal commitment” to “allow the full reopening of the energy sector” by Sept. 12. This, in turn, fueled fears of an oversupply.

On the other hand, the cautious sentiment of the crude oil traders was further bolstered after the Energy Information Administration (EIA) lowered the 2020 demand forecast by 210,000 barrels per day. Furthermore, the numbers of coronavirus (COVID-19) cases continue to rise even faster, which suggests further hardships in terms of the energy demand. In the meantime, the end of the driving season in the US is also putting pressure on the black hydrocarbon derivative.

Across the pond, the market trading sentiment has remained supportive, thanks to the positive news concerning the coronavirus (COVID-19) vaccine. It is worth mentioning that AstraZeneca is ready to resume its vaccine trials after a brief “routine” break, and Pfizer also seems confident about finding a cure for the pandemic by the end of the year.

As a result, the US dollar remained bearish, refreshing the intra-day low level on the day. Moreover, the losses in the US dollar could also be associated with a cautious sentiment ahead of the US Federal Reserve’s policy meeting, which is scheduled to take place on Wednesday. The losses in the US dollar kept the oil prices higher, as the oil price is inversely related to the price of the US dollar. Meanwhile, the US Dollar Index, which tracks the greenback against a basket of other currencies, had dropped by 0.16%, to 93.192, by 11:57 PM ET (4:57 AM GMT).

On the contrary, the market fears relating to the US-China tussle and uncertainty surrounding the US aid package, not to forget the on-going uncertainty regarding a recovery in the demand for fuel, are all concerns that keep challenging the upbeat trading sentiment on the market.

On the US-China front, the Sino-China tensions continue to boil, after China’s retaliation to the US sanctions against diplomats. Meanwhile, the looming decision on the TikTok app is also keeping the world’s two largest economies on the slippery track. Looking ahead, the market traders will keep their eyes on updates surrounding the Brexit, the coronavirus and the US-China tussle. Furthermore, investors are also keeping an eye on the US Federal Reserve’s policy meeting, which is scheduled to take place on Wednesday.

Daily Support and Resistance
S1 35.3
S2 36.41
S3 37.01
Pivot Point 37.52
R1 38.12
R2 38.63
R3 39.74

WTI Crude Oil is trading at the 37.55 level, holding mostly below an immediate resistance level of 38.50. Below this, trading in the WTI could be bearish until the 37.19 level. Violation of this range could determine the next trend, for example, the odds of the selling trend remaining strong upon the breakout at the 37.19 level, and it may lead oil prices towards the support level of 36.44. Conversely, the bullish crossover at the 38.50 level may lead oil prices towards the 39.45 resistance mark. Good luck!