WTI slips below $39.00 to snap two-day winning streak

• WTI extends pullback from four-day top of $40.04.
• The EIA inventory fall, US-China tussle add strength to the post-Fed consolidation.
• US economics, Sino-American story might entertain traders amid a light calendar.

WTI stays pressured near $38.75 amid the early Asian session on Thursday. The oil benchmark again ticked beyond $40.00 during the previous day but failed to keep the Fed-led gains. The reason could be spotted from the recently refreshed US-China tension. Additionally, traders seem to offer a late reaction to the heavy stockpiles data from the Energy Information Administration (EIA).

The EIA inventories for the week ended on June 05 grew past -1.738M forecast to +5.72M. On Tuesday, inventory data from the private reporter, American Petroleum Institute (API), also marked a notable build of 8.42 million barrels versus forecasted declines of 0.483 million barrels.

Talking about the Fed and its market impact, the US central bank marked a dovish halt with no rate alterations joining watered-down economic projections and rate forecasts. Chairman Jerome Powell also showed readiness to use unconventional tools like the Yield Curve Control (YCC). Following the event, the US dollar extended its weakness towards refreshing the three-month low, as per the US dollar index (DXY).

The greenback’s fall was aptly cheered by the oil traders but couldn’t hold the rise amid fresh US-China tussle. China’s Global Times indirectly criticized US President Trump’s take on the Fed’s performance. The move was then altered by US Vice President Mike Pence who showed tough stand against Beijing on the trade deal. However, the BNN’s news that the dragon nation still buys enough of American Soybeans might help recede the tension.

It should also be noted that the geopolitical tension in Libya as the recently announced extension of OPEC+ output cut favor the bulls. On the contrary, Saudi Arabia’s signal to not favor further stretching of production cut might keep the optimism chained.

Technical analysis

Despite posting a higher low formation, WTI bears might notice another failure of oil prices to stay beyond $40.00 as a ray of hope. Though, a downside break of the monthly support line, currently around $37.20/15, becomes necessary for confirmation of additional weakness.