WTI retreats from 12-week high as OPEC+ news confront Sino-American tension

• WTI steps back from 13-week top of $36.04 flashed early in Asia.
• OPEC+ to pre-pone meeting, calls for 1-2 month extension to current output cuts are on the hike.
• US and China remain at loggerheads, riots in America add to the geopolitical worries.
• China’s Caixin Manufacturing PMI can offer immediate direction to energy prices.

WTI eases from the highest since March 11 to $35.20 during Monday’s Asian session. Upbeat sentiment surrounding the Organization of the Petroleum Exporting Countries (OPEC) and its allies, mostly known as OPEC+, earlier helped the black gold to refresh multi-day high to $36.04. However, fears of escalating US-China tensions seem to have challenged the energy bulls off-late.

As per the energy intel reports conveyed by Amena Bakr, “the OPEC+ could meet on June 4 to decide on a market management policy that might extend the current production cut pact by up to two months."

The oil producers’ group was earlier scheduled to meet on June 09 to re-discuss the extension of 9.7 million barrels of output cut that was agreed to take place till June 01.

China seems not in a mood to appreciate US President Donald Trump’s step-back from any fresh sanctions, as feared, during the Friday’s conference. The reason could be spotted in the South China Morning Post (SCMP) article highlighting the dominance of groups calling for more ‘fighting spirit’.

Also adding to the tension could be the latest comments by US Secretary of state Mike Pompeo. The Trump administration appeared for an interview with Fox News during the weekend and said, “this is a Chinese communist party that has come to view itself as intent upon the destruction of western ideas, western democracies, and western values.” It was also mentioned that the Chinese Communist Party’s military advances are real and that President Trump will always keep us in a position where we can protect the American people.

It should also be noted that riots in some of the American states and downbeat figures of China’s NBS Manufacturing PMI added weakness into the black gold.

Though the bears aren’t in dominance as China’s Caixin Manufacturing PMI for May, expected 49.6 versus 49.4, is still not out. Also stopping the sellers could be the wait for the US activity numbers and further clarity over the US-China relations.

Technical analysis

Unless providing a daily closing beyond March 11 top near $36.65, bulls are less likely to get a confirmation in filling the gap between $41.21 and $35.08. On the contrary, the quote’s downside break of an ascending trend line from May 14, at $33.00 now, could trigger fresh fall towards $30.00.