With the US President Donald Trump intensifying global trade tension, WTI drops to March lows with a bottom of $55.60 per barrel. Even if the war-like situation between Iran and Iraq, together with an on-going global oil production cut, indicates future supply crunch, questions to the global trade system raise bars for demand outlook. The US President Donald Trump recently announced 5% tariffs on all Mexican goods imports in order to push the nation towards stopping illegal migration into the US. He also said the tariffs could go on to as high as 25% if the trade partner doesn’t solve the situation by October. Adding to the price weakness could be China’s official purchasing manager index data wherein manufacturing PMI slipped into activity contraction region with 49.4 versus 49.9 expected and 50.1 prior while non-manufacturing PMI remained unchanged at 54.3 by lagging behind 54.5 consensuses.
Crude oil prices continued to decline during yesterday's session as all near term support levels were breached to the downside. The price is currently hovering just above the lows at $55.83 per barrel, however, we can notice a huge divergence between the price and the momentum which points towards a recovery in prices. This price is more likely to go lower at this point before we can focus on the upside, that is why we will be watching the $55.06 support level.
Support: 55.73 / 55.06
Resistance: 56.69 / 58.02