WTI prints mild gains above $42.00 ahead of API data

• WTI keeps the bounce off $42.40 to mark the second positive day.
• Challenges to the US dollar’s latest recovery moves favor the latest pullback.
• Receding coronavirus (COVID-19) numbers add to the optimism.
• API data, virus headlines and the US dollar moves will be important to watch.

WTI takes rounds to $42.50/55 ahead of Tuesday’s Tokyo open. The energy benchmark recently gained bids amid challenges to the catalysts supporting the US dollar strength. Also supporting the mood could be a recovery in virus numbers and a lack of major negatives for energy markets. Though, traders remain cautious before the weekly inventory data from the American Petroleum Institute (API).

Risk-on sentiment probed…

The latest comments from the US health official Anthony Fauci pours cold water on the face of the Trump administration’s efforts to fast-track the COVID-19 treatment. “Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, declined to comment on the president, but said there are risks in rushing out a vaccine despite the urgent need,” said Reuters.

On Monday, markets cheered increased odds of overcoming the pandemic in the US after President Donald Trump authorized the use of plasma from recovered COVID-19 patients to treat current patients. The optimism also gained clues from another push to gain first hand over AstraZeneca’s vaccine and the receding numbers from new cases from Florida as well as no new virus-led deaths in Arizona.

Elsewhere, the US-China tussle remains on the play as another ally of America, namely India, shut doors on the face of China’s Huawei. Furthermore, US Secretary of State Mike Pompeo’s comments to keep providing military support to Israel also played their part to challenge the previous risk-on sentiment and support the commodity.

Amid all these catalysts, the US 10-year Treasury yields seesaw around 0.65/66% whereas S&P 500 Futures catch a breather around 3,428/30 after refreshing the record high the previous day.

Looking forward, the API inventory data, prior -4.264M, will be the key to forecast WTI moves while US dollar performance and risk news will also be important to follow for immediate direction.

Technical analysis

Unless breaking a short-term ascending triangle, currently between $43.20 and $41.80, oil prices are likely to remain compressed.