WTI jumps 1.50% to regain $41.50 despite US-China tensions

• Oil reverses a dip below 41.00 amid USD weakness.
• WTI bulls shrug off US-China escalation-led risk-off mood.
• Eyes on US-China updates, virus stats and US data.

WTI (futures on Nymex) has staged a V-shaped recovery from the daily low of 40.72, now looking to extend the pullback above 41.50.

Broad US dollar weakness continues to feed into the demand for the barrel of WTI, as a weaker greenback makes the USD-denominated oil affordable to foreign buyers. The US currency remains pressured by the dwindling economic recovery, coronavirus surge and uncertainty over the next round of fiscal stimulus.

The oil market has largely ignored the heightening tensions between the US and China after Beijing retaliated earlier this Friday and ordered a shutdown of the US consulate in Chengdu. Recall that the US ordered China to close down its Houston consulate on Tuesday over the theft of the Intellectual Property.

However, it remains to be seen if the black gold can extend its recovery momentum, as the unexpected build in the US crude inventories, fresh lockdowns in the US states and the prevalent risk-off mood.

The Energy Information Administration (EIA) data showed on Wednesday that the US crude inventories rose by 4.9 million barrels in the week to July 17 to 536.6 million barrels vs. expectations for a 2.1 million-barrel drop.

The focus now remains on the US-China updates, fresh US COVID-19 stats, Markit Manufacturing PMI and Baker Hughes oil rigs count data for the next direction in the prices.

WTI technical levels to watch

“A clear upside past-$41.45 will have $41.80 and $42.40 acting as the buffers before the monthly top close to $42.52. Should the bears manage to stay dominant past-$41.00, a two-week-old support line, at $40.70 now, will be the key to $40.00 round-figure,” explains Anil Panchal, FXStreet’s Analyst.

WTI additional levels