CRUDE OIL SLIPS AMID U.S.-CHINA TENSIONS, RISING CORONAVIRUS INFECTIONS

Oil prices edged lower in the early trade on Monday as tensions between the United States and China, and concerns over recovery in oil demand resurfaced amid resurgence in the number of COVID-19 cases worldwide pushed investors towards safe-haven assets. 

Brent crude rose 34 cents, or 0.78%, to $44.12 a barrel, while U.S. West Texas Intermediate (WTI) crude inched up to $41.66 a barrel, up 37 cents, or 0.90%, at the time of writing.

The fall in oil mirrored moves in broader financial markets in Asia amid concerns about escalating tensions between the world’s two biggest economies following the closures of consulates in Houston and Chengdu. Global coronavirus cases, meanwhile, exceeded 16 million.

The U.S. recorded a near record 74,000 new cases of COVID-19 on Friday, according to Johns Hopkins University data. More than 1,000 Americans died each day between Tuesday and Friday, the worst death tally since late May. The numbers may lead to further closures and lockdowns and hit a demand for fuel. 

Brent is on track for a fourth straight monthly gain in July and WTI is set to rise for a third month as unprecedented supply cuts from the Organization of the Petroleum Exporting Countries and its allies, including Russia propped up prices. Output has also fallen in the United States. 

Oil demand has improved from the deep trough of the second quarter, although the recovery path is uneven as resumption of lockdowns in the United States and other parts of the world are capping consumption. 

The rebound in oil prices from low hit earlier this year has also encouraged the world’s top producers to increase output. The U.S. oil rig count rose last week for the first week since March. 

Investors are also watching for any impact from storm Hanna, which battered the Texas coast over the weekend, threatening heavy rains in Texas and Mexico. Oil and gas producers and refiners said on Friday that they did not expect the storm to affect operations.

The U.S. oil rig count rose last week for the first week since March after producers added one rig, Baker Hughes data showed, a sign that U.S. oil production decline may have bottomed out.

The Crude Oil prices are getting affected because of growing tension in the relationship between the U.S. and China, two of the largest oil consumers in the world. Fears of a full-blown diplomatic conflict over the next few months have increased, affecting the value of the dollar and dampening expectations of a sharp increase in demand for fuel. 

On the technical front, the RSI is at 53.87% and suggests that the market can move in an upward direction. The current price is trading above all the moving averages. The stochastic is forming an upside crossover.

Overall Bias is Positive and Short-term trades can be initiated with below mentioned Stop Loss and Profit targets.

Trade Suggestion—CRUDE OIL—BUY at $41.45 Take Profit at $42.50 Stop Loss at $40.60