WTI extends Friday’s losses below $38.00 as trading sentiment worsens

• WTI stretches the latest downside from $38.64 to print the second day of losses.
• Coronavirus woes, trade war fears and geopolitical tension weigh on risk-tone.
• Baker Hughes rig counts dropped for the 15^th week in a row, though by just one to 188.
• US Dallas Fed Manufacturing Business Index, risk catalysts will remain in focus.

WTI drops to $37.78, down 1.22% on a day, during Monday’s Asian session. The oil benchmark trades near the intraday low of $37.74 while flashing a two-day losing streak. Although there are no major oil-specific updates off-late, risk aversion wave has been the recent burden on the commodity prices. Additionally, the quarter-end squaring off of the positions could also be considered as an extra reason for the black gold’s recent weakness after notable upside since late-April.

With the coronavirus (COVID-19) outbreak in the US, as well as a surge in the cases from Tokyo and China, global markets have been risk-averse off-late. The recent update signals that the pandemic has already claimed nearly half a million lives while heavily impacting Texas, Florida and Arizona states of the US amid the second wave. Additionally, China ordered strict lockdown for the Anxin County and Tokyo registered the highest figures since canceling of national emergency during the late-May.

Also weighing on the market’s mood could be the fresh wave of trade wars between the US and the rest of key global economies. The Trump administration’s threat to levy fresh tariffs on imports from the EU, the UK and Canada gained widespread criticism. Additionally, signals from the White House suggesting anti-dumping charges on Asian tire manufacturers also suggest the return of the trade pessimism that weighed on the market mood and commodities during the early-year.

It’s worth mentioning that the US-Iran tussle and war like situations between India and China have dual impacts on oil prices. However, none of them gained a major attention off-late amid the virus woes and trade worries.

Against this backdrop, the US 10-year treasury yields remain depressed around 0.635% while Japan’s Nikkei drop 1.60% to 22,130 as we write. Further, S&P 500 Futures also lose 0.20% to 3,000 by the press time and portray a risk-off mood.

Talking about the oil-specific data, Baker Hughes US Oil Rig Counts dropped for the 15 weeks in a row during Friday’s release. However, the weakness seems to recede with only one closure to 188.

Although recently mixed inventory data and sustained declines in the rig counts favor the oil prices, not to forget geopolitical tension, the broad risk-aversion amid the pandemic worries keep the black gold pressured. Moving on, today’s US Dallas Fed Manufacturing Business Index expected -59 in June from -49.2 prior, might offer immediate direction to traders.

Technical analysis

21-day EMA joins the monthly ascending trend line around $37.40/35 to make it the near-term key support. Meanwhile, $39.40 and $40.00 might entertain buyers during the pair’s pullback moves.