Oil Price Forecast: WTI extends losses below $13.00, focus on API data

• WTI drops over 2.0% while stretching the previous day’s losses to the early Asian session.
• Demand-supply imbalance gives rise to worries over storage capacity.
• Fitch cites coronavirus-driven demand destruction and excess supply as fears for the US energy firms.
• API data, pandemic details will be the key.

With no positives from the energy front, NYMEX WTI futures for June prints the second day of losses while declining to $12.40, down 2.80% on a day, amid the early Asian session on Tuesday.

Reuters cited a 30% drop in global demand, mainly due to the coronavirus (COVID-19), while citing the energy traders’ desperation for places to park petroleum products on Monday.

Following that Fitch also came out with the warning bells for the US firms based on the currently demand-supply imbalance. The latest update from the rating giant said, “Low oil prices, caused by coronavirus-driven demand destruction and excess supply, and historic volatility due to storage concerns could accelerate US energy sector defaults. Fitch cut its oil price assumptions in early April due to the effect of the coronavirus pandemic on the global economy and oil demand and the resulting very large oversupply. Our West Texas Intermediate (WTI) base case assumption is $32 per barrel (bbl) in 2020 and $42/bbl in 2021, while our stress case is $27/bbl and $32/bbl, respectively.”

Market’s risk-tone sentiment also pauses the previous day’s positive momentum with the S&P 500 Futures marking mild losses while the US 10-year Treasury yields flashing minor gains during the initial hours in Asia.

While the OPEC+ alliance is yet to take any additional measures, other than the 9.7 million barrels a day output cut that will activate from May 01, traders will keep the bearish bias amid the present pandemic-led global lockdowns.

Moving ahead, the weekly release of private inventory data from the American Petroleum Institute (API), up for publishing at 20:30 GMT, will be the immediate catalyst to watch. The industry stockpile for the week ended on April 24 might follow the footsteps of the previous addition of 13.226 million barrels into the inventories. That said, the outcomes should exert additional downside pressure on the black gold.

Technical analysis

While a failure to cross 21-day SMA, currently near $17.10, drives the energy benchmark towards the south, 10-day SMA close to $10.40, followed $10.00 round-figure, seems to limit the black gold’s further declines.