WTI slips below $42.00 amid a quiet Asian session

• WTI takes a U-turn from $41.70 amid recent risk reset.
• Hopes of further stimulus favor confront US-China tussle.
• EIA stockpiles followed the footprints of API inventories.
• Traders will keep eyes on the risk catalysts, for fresh impetus.

WTI drops to $41.98, up 0.15% on a day, while heading into the European open on Thursday. The black gold recently dropped following the increase in Sino-American tension as well as downbeat inventory data from the Energy Information Administration (EIA). In doing so, it ignores the previous recovery moves based on US policymakers’ signals of further stimulus.

The EIA Crude Oil Stocks Change for the US grew beyond -2.088M forecast and -7.493M previous readings to 4.72M during the week ended on July 17. The official inventory levels matched the tunes with the private stockpile published by the American Petroleum Institute (API) on Tuesday. The US API Weekly Crude Oil Stock grew 7.544M against -8.322M during the state period.

Countering the bears are the expectations that the US policymakers will soon deliver a compromised phase 4 fiscal package, ranging between $1.00 trillion and $3.5 trillion. Also increasing the upside momentum could be the broad US dollar weakness. The US dollar index (DXY) dropped to the fresh lows since March 10 on Wednesday. The greenback gauge versus the major currencies currently seesaws around the lows of 94.82, down 0.10% as we write.

Alternatively, the escalation in the US-China tussle grows following the Trump administration’s order to the Chinese consulate to leave Houston. The move should ideally weigh on the demand forecast and weigh over the black gold’s prices. However, a lack of major activity, amid Japan’s off and a light calendar, seems to keep the buyers on the table.

The oil traders will have to keep eyes on the weekly US Jobless Claims, expected to remain unchanged around 1300K, for immediate direction. Additionally, headlines concerning the virus, US-China and fiscal stimulus from America will also be important to watch.

Technical analysis

The oil benchmark’s latest U-turn follows the short-term rising wedge formation, which in turn could recall $40.60 support, comprising an ascending trend line since June 15. Meanwhile, Tuesday’s top near $42.52 joins $42.00 to limit the quote’s nearby advances ahead of the said bearish pattern’s resistance-line, at $42.60 now.