WTI recovers amid fresh trade/political risks

• Uncertainty surrounding the US-China trade deal, China’s concern for Hong Kong and the tension surrounding Iran trigger WTI pullback.
• Trade/political headlines, API data will be in the spotlight.

With the fresh threats emanating from global trade/political front, WTI stops the three-day-old downturn while trading near $54.00 amid Wednesday’s Asian session.

Growing expectations of the global slowdown, based on the US treasury yield inversion, and no comments for the much-awaited US-China trade negotiations, previously anticipated around early-September, have been weighing on the energy benchmark off-late.

However, political tension surrounding Iran and Hong Kong keep the black gold buyers happy. Recently, the US levied fresh sanctions on Iranian organizations like Space Agency, Space Research Center and the Astronautics Research Institute. In retaliation, Iran warns of further stepping back from the nuclear deal if the EU takes the US view and delays the action concerning expectedly $15 billion credit lines. Elsewhere, China continues to make itself marked in Hong Kong crisis as the Wall Street Journal (WSJ) article quotes an anonymous Chinese official saying “it had legal power to unilaterally declare a state of emergency in the city if unrest continues unabated, while laying out specific measures for the city’s leader to address protests.”

It should also be noted that recent activity numbers from Japan, China, Hong Kong and Korea have been mixed and raise challenges while forecasting the oil benchmark’s future moves.

Investors will now look forward to weekly industry oil stock reports for fresh impulse while trade/political news headlines could keep offering intermediate moves. The American Petroleum Institute’s (API) weekly crude oil stock report for the US last flashed -11.1M figure for the week ended on August 23.

Technical Analysis

FXStreet Analyst Ross J Burland spots 200-day moving average as the key resistance while saying:

Oil prices have been whipsawed with no clear technical direction mapped out on the four nor daily charts of late. However, while below the 38.2% Fibonacci retracement a bearish bias persists. Overnight, the bears tested the upper end of the 52 handle’s waters with a 61.8% Fibo target at 51.70 in focus. Should the bulls manage to pick up traction, they are some way off now from the 60 handle and the 200-daily moving average at the 56 handle and testing trendline resistance.