WTI remains in the hands of the bears as covid threatens

• OIl is attempting to stabilise and correct in Tokyo.
• The US dollar remains firm and covid cases are rising, threatening global demand for oil.

Spot US West Texas Intermediate (WTI) crude was lower again on Monday and down some 1.17% into early Asia before the CFD close.

WTI fell from a high of $67.97 to a low of $65.17 while Brent futures lost $1.66, or 2.4%, to settle at $69.04 a barrel, WTI crude dropped $1.80, or 2.6%, to settle at $66.48.

The price is trying to stabilise in Tokyo at $66.80 between a low of $66.78 and a high of $66.98. 

Oil has been trying to hold on at a three week low after extending last week's drop as investors weigh the supply vs demand risks with the resurgence of a global coronavirus pandemic.

Demand is being sapped and expectations are that the covid-related restrictions in Asia, especially China, could slow a global recovery in fuel demand even further.

For instance, the latest data from China has shown that the heavily populated nation has reported 125 new COVID-19 cases on Monday, up from 96 a day earlier.

''While most of China’s population is vaccinated, officials are still tackling outbreaks with mass testing and targeted lockdowns. This is already weighing on mobility. Chinese airline seat capacity plunged 32% in one week amid fresh restrictions, according to aviation specialist OAG,'' analysts at ANZ Bank explained. 

In Malaysia and Thailand, infections hit daily records. Notably, China's export growth slowed more than expected in July after outbreaks of COVID-19 cases and floods, while import growth was also weaker than expected.

As for the US, the nation is now reaching the highest levels of new cases and hospitalisations in six months also. US air travel has plateaued for almost two months amid ongoing travel restrictions.

At the same time, the US dollar has bounced hard on the hawkish expectations at the Federal Reserve

With the risks of covid coupled with a strong US dollar, the price of oil is becoming severely less attractive to investors. 

WTI technical analysis

WTI fell to the 65 figure as the key level that guards lower cycle lows.

However, demand at this juncture could be enough to equate to a significant correction for the sessions ahead towards prior lows that meet the 50% mean reversion of the down move near 67.65.

Having said that, 63.77 could come under pressure in due course as a Fibo continuation target to the downside.