WTI pares intraday losses to sub-$61.00 levels, still down over 1% for the day
- Renewed COVID-19 jitters fueled demand concerns and weighed heavily on oil prices.
- A modest USD rebound from multi-week lows contributed to the intraday selling bias.
- The commodity managed to find support near the $60.60 area, last week’s swing lows.
WTI crude oil trimmed a part of its intraday losses to multi-day lows and was last seen trading around the $61.30-35 area, still down over 1% for the day.
The black gold came under some heavy selling on the first day of a new trading week and erased its gains recorded over the past two trading sessions. Investors now seem worried that surging COVID-19 cases in India and Japan – the world’s third and fourth-biggest oil importers – will drive down fuel demand. This turned out to be a key factor that exerted fresh downward pressure on the commodity.
Apart from this, the expected supply increase from OPEC+ further acted as a headwind for crude oil prices. The OPEC and its allies, known as OPEC+, will discuss output policy at a meeting later this week. Most analysts believe that the alliance will go ahead with its decision to ease production curbs by 350,000 barrels per day (bpd) in May, another 350,000 bpd in June and a 400,000 bpd in July.
Further contributing to the downside was a modest US dollar rebound from multi-week lows. A stronger USD tends to undermine demand for dollar-denominated commodities, including oil. A goodish pickup in the US Treasury bond yields extended some support to the greenback. That said, expectations that the Fed will keep rates low for a longer period and softer US macro data should cap gains for the buck.
Despite the negative factors, the commodity managed to find some support near last week's swing lows, around the $60.60 region, warranting some caution for bearish traders. This makes it prudent to wait for some strong follow-through selling below the mentioned level before traders start positioning for any further depreciating move, possibly towards challenging the key $60.00 psychological mark.
Technical levels to watch