WTI oil probes below $40 mark on Tuesday after hitting session high at $40.76, as sentiment sours on rising number of new Covid-19 cases that raises fears of slowing recovery in fuel demand.

The US crude trades within extended consolidation around $40 level after strong recovery from record lows in April lost positive momentum and investors took more cautious approach as worries that global demand won’t recover at expected pace, dented initial optimism in the oil market.

The tone during past couple of weeks remains neutral, with price action moving around $40 level and showing no signs of clearly breaking higher, but the downside was so far protected.

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Daily studies show weakening bullish momentum and south-heading stochastic that could be seen as initial negative signal, which would require further verification on break of pivotal supports at $39.51 (10DMA) and $38.95 (20DMA).

Stronger bearish signals could be seen on weekly chart, where momentum is in steep fall and stochastic emerged from overbought territory after forming bearish divergence. Loss of 10/20DMA support would weaken near-tern structure and risk test of pivotal support at $37.06 (25 June low).

Extended neutral mode could be expected while the price remains above 20DMA, while initial bullish signal would be generated on sustained break above $40 level. US API crude stocks report is in focus today and another draw in oil inventories would keep the price afloat.

Res: 40.76, 41.05, 41.61, 42.00
Sup: 39.51, 38.95, 38.07, 37.49

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