WTI extends losses to $58.70 amid receding geopolitical tension
- WTI fails to hold onto the week-start gains as global leaders push for peace in the Middle East.
- Off at the US markets also capped the market’s reaction to the news and triggered follow-on pullback.
- Trade/political headlines will be the key to watch.
WTI remains on the back foot while flashing $58.70 as the quote during the Asian session on Tuesday. The black gold registered a daily negative closing on Monday, despite the week-start gap-up, as global policymakers firmed up actions to tame the risks emanating from the Middle East. Furthermore, the IMF forecast and absence of the US trades also weighed on the energy prices.
The UK Telegraph reports the news that the US and Britain will reduce troops in Iraq to defuse regional tension. The same could prove helpful to tame the protests in the country that led to a shutdown of oil pipelines during the weekend. On the other hand, the Guardian rolled out the news that Gen Khalifa Haftar of Libya, the military leader in the country’s east, ignores international calls to seek a negotiated political settlement to the civil war. Even so, likely resolution to the German-initiated calls of peace as well as the US holiday exerted downside pressure on the energy benchmark.
Also disappointing the oil bulls are comments from the International Monetary Fund (IMF) from the World Economic Forum in Davos. The global institute further cut down its 2019 and 2020 growth forecasts to 2.9% and 3.3% respectively but expected recovery during the current year could offer relief to the investors.
Trade sentiment remains a bit pressured as the US 10-year treasury yields slip 1.5 basis points to 1.82% whereas the S&P 500 Futures also lose 0.05% to 3,323 by the press time.
Investors will now focus on how the markets welcome the return of the US players. On the economic calendar, the weekly reading of the American Petroleum Institute’s (API) US oil inventories will be delayed for a day to Wednesday due to Monday’s off and the same will be for the official inventory numbers from the Energy Information Administration (EIA).
While prices remain weak unless crossing a 21-day SMA level of $60.30 on a daily closing basis, 200-day SMA near $57.70 holds the key to further declines.