WTI drops back below $42 mark amid US-China tensions

• US-China tensions negate Chinese US oil imports plans.
• US dollar remains offered despite fresh risk-off wave. 
• Eyes on US-China updates, US weekly crude stocks data.

WTI (futures on Nymex) meets a fresh selling-wave and breaches the 42 level, as the demand for higher-yielding/ risk assets appears to have diminished amid renewed US-China tensions. The sentiment on the European markets soured after China’s Foreign Ministry declined to justify the delay in the US-China trade deal review while making bold comments on the TikTok issue. The resurfacing tensions between the two leading economies overshadowed the optimism about China ramping up its US oil purchases. The black gold rallied overnight to reach two-day highs of $42.76 on news that China planned to ship large volumes of US crude in August and September. A sense of caution also prevails across the oil market, as investors shift their focus to the OPEC and its allies (OPEC+) meeting due this Wednesday. The OPEC+ decision on the oil output policy will have a major impact on the barrel WTI. In the meantime, the US dollar price action, developments around the US-China relations and weekly US crude stockpiles data will influence the black gold.

WTI technical levels

“With the normal RSI conditions joining the energy benchmark’s sustained trading beyond the crucial SMA, buyers are likely to regain the controls should the quote manage to clear $43.00 triangle resistance. Alternatively, a downside break of the triangle’s support, at $42.30 will have to slip beneath the 100-bar SMA level of $41.67 to aim for $41.00 and $40.60/55 rest-points,” FXStreet’s Analyst, Anil Panchal, explained.