WTI renews 13-day low as sellers attack $67 despite geopolitical jitters in the Middle East

  • WTI takes offers near the lowest since July 21, extends Friday’s losses.
  • Taliban firms up control in Northern Afghanistan after the US troops withdraw.
  • US dollar strength, covid woes add strength to the bearish impulse.
  • China inflation data, risk catalysts will be the key.

WTI seesaws around $67.00, down 1.00% intraday, amid the early Asian session on Monday. In doing so, the oil benchmark drops to the fresh low since July 21 despite news from the Middle East and North Korea raise supply concerns. The reason could be linked to the broad US dollar strength.

Nikkei cites a United Nations (UN) report to state highlight a picture of Pyongyang continuing to develop its nuclear and ballistic missile programs despite its economy worsening due to the COVID-19 pandemic. The US and the European Union (EU) have been pushing North Korea for nuclear peace but the progress was very slow.

On the other hand, Reuters came out with the news saying, “Taliban fighters overran three provincial capitals including the strategic northeastern city of Kunduz on Sunday, local officials said, as the insurgents intensified pressure on the north and threatened further cities.”

In addition to North Korea and the Taliban, geopolitical tussles between the US and Iran also challenge oil supplies and should have favored the WTI.

However, the broad US dollar strength, backed by the firmer employment data, stimulus news and covid woes, weighs on the black gold prices.

That said, the US Dollar Index (DXY) gains 0.56% by the press time to 92.78 whereas the S&P 500 Futures drop 0.30% and the US 10-year Treasury yields add 1.7 basis points (bps) to 1.30% while writing.

Given the risk-off mood weighing on the oil prices, traders may wait for China’s inflation figures for July to portray an intermediate bounce. Though, any disappointment from the key data may add to the oil’s weakness. Forecasts suggest the YoY figures are likely to ease wherein the headline Consumer Price Index (CPI) data for MoM could reverse -0.4% prior with +0.2% figures. That said, the Producer Price Index (PPI) may remain unchanged at 8.8% YoY whereas the CPI is expected to ease from 1.1% to 0.8% on YoY.

Technical analysis

A clear downside break of an ascending support line from March, near $67.20, precedes 100-DMA surrounding $67.10 and the $67.00 to challenge the WTI oil bears.

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