WTI strength fizzles around $34.00, API data eyed

• WTI futures on NYMEX ease from 11-week top of $34.91.
• Markets players reassess the previous risk-on sentiment amid fresh challenge to US-China relations.
• China’s Industrial Production, headlines concerning the Hong Kong issue can offer immediate direction.

WTI retraces from the highest since March 11 while taking rounds to $33.90 during the initial Asian session on Wednesday. While optimism surrounding an increase in demand, amid global supply cuts, favored the black gold the previous day, fresh doubts concerning the relations between the US and China seem to weigh on the quote off-late.

Following US President Donald Trump’s hint for sanction on China, the market’s earlier optimism faded. Also exerting downside pressure on the risk-on sentiment could be the updates suggesting Russian jets’ interception to the US Navy P-8 patrol aircraft.

It’s worth mentioning that the hopes of economic restart and nearness to the coronavirus (COVID-19) cure dragged the US dollar, which in turn helped commodities like oil to benefit from. Additionally, the on-going production cuts by the OPEC+ alliance, as well as market-based reduction from the US, seemed to have added strength to the oil benchmark on Tuesday.

That said, optimists catch a breather as US 10-year Treasury yields slip 1.3 basis points (bps), after rising over three bps the previous day to 0.685%. Further portraying the cautious sentiment could be Japan’s NIKKEI that drops near 0.50% to 21,150 amid the initial hour of Tokyo trading.

Moving on, China’s April month Industrial Profits and further details on the US-China relations due to the Hong Kong Security Bill could offer immediate direction to the oil benchmark. Furthermore, weekly inventory data from the American Petroleum Institute (API), prior -4.8 million barrels, will also be the key.

Technical analysis

Unless providing a daily closing beyond a 100-day EMA level of $35.40, sellers remain hopeful of revisiting Friday’s low near $30.90.

Additional important levels