During Friday’s Asian trading session, WTI crude oil prices failed to stop their overnight losses and represented almost $4 decline in one day. Crude oil dropped from the $39.80 highs to test the trend line support of the last four weeks’ rally at $35. The increased fears of the second wave of the COVID-19 outbreak were triggered by the rise in US coronavirus cases this week, which eventually exerted some downside pressure on the demand for crude oil.

The gloomy US economic outlook released by the Fed on Wednesday remained on the cards and turned out to be one of the key factors that kept investors cautious. At the moment, WTI crude oil prices are currently trading at 35.42 and consolidating in the range between 34.49 and 36.36. WTI crude oil was down 65 cents, or almost 2%, at $35.69 a barrel by 03:58 GMT, after falling more than 8% yesterday.

Moreover, the reason for the sharp decline in crude oil could also be attributed to the report of the US Energy Information Administration, which showed a larger than expected build-up in oil stockpiles. As per the EIA, oil inventories increased by 5.7 million barrels in the week of June 5, against expectations of a 1.45 million decline.

At the USD front, the reason for the crude oil’s selling bias was further bolstered by the broad-based US dollar strength fueled by a report that showed that the US crossed more than 2 million COVID-19 cases as of June 12, which supported renewed fears of a second wave of coronavirus. Besides this, investors are also cautious and preferring to invest their money into safe-haven assets due to the possibility of renewed lockdowns to stop the spread. As a result, the US dollar took bids on the day while the US Dollar Index that tracks the greenback against a basket of other currencies increased 0.11% to 96.850 by 11:40 PM ET (4:40 AM GMT).

On the positive side, the announcement about hopeful results of the COVID-19 drug’s clinical trials over animals by China turned out to be one of the key factors that kept a lid on any additional losses in the crude oil, at least for now.

Looking forward, the US Michigan Consumer Sentiment Index for May, expected 75 against 72.3 previously, will likely entertain short-term traders during the US session. However, the absence of major catalysts will push investors to take cues from news/headlines.

Daily Support and Resistance

S1 34.71

S2 36.83

S3 37.87

Pivot Point 38.95

R1 39.99

R2 41.07

R3 43.19

From the technical perspective, crude oil prices have dropped from 3-month tops above $40 to $36.18 lows so far, the largest daily decline since March 27, backed by the peak of the COVID-19 shutdown. The daily chart shows WTI oil testing the upward trending support from May 13 low, now around $36. US oil prices are gaining double bottom support around 34.65 level. Above this level, WTI has odds of bullish trend continuation, which can lead to higher crude oil prices until 36.65 level. Continuation of a bullish trend can lead prices further higher until 38. While selling can be seen only if oil manages to violate 34.633 level. On the lower side, the next support holds around 32.95.

Good luck!