WTI crude oil regains $71.00 after volatile day, Middle East news, China inflation in focus

• WTI crude oil bounces off weekly low despite lacking upside momentum of late.
• Oil sellers cheered market speculators of US-Iran nuclear deal before getting rejection of the same from White House.
• Saudi Arabia threatens major economic pair for US due to chatters of Oil sanctions.
• China CPI, PPI eyed for clear directions, US Dollar weakness may also help energy buyers.

WTI crude oil picks up bids to pare the biggest daily loss in a week around $71.25 during early Friday. In doing so, the black gold cheers downbeat US Dollar, as well as the latest headlines surrounding Saudi Arabia, to pare the previous day’s heavy fall ahead of China’s headlines inflation data.

That said, the Washington Post recently came out with news quoting the Saudi Crown Prince Mohammed bin Salman’s threat to thwart the US-Saudi ties if the Washington retaliates to the output cut policy. The same joins the sluggish US Dollar Index (DXY) around 103.30, after falling the most in two months the previous day, to favor the energy buyers.

Previously, rumors that the US and Iran have signed a nuclear deal and the same will allow the latter to overcome the Oil sanctions have drowned the WTI prices. However, the White House rejected such claims afterward and triggered the commodity’s rebound from the weekly low.

Elsewhere, downbeat US data weighed on the US Dollar while optimism in China, one of the world’s biggest commodity users, also keeps the energy benchmark positive.

On Thursday, US Initial Jobless Claims rose to 261K in the week ended on June 02 versus 235K expected and 233K prior (revised). With this, the four-week average rose to 237.25K from 229.75K previous readings. Further, the Continuing Jobless Claims dropped to 1.757M in the week ended on May 26 from 1.794M prior (revised), compared to 1.8M market forecasts. Earlier in the week, the US ISM Services PMI, S&P Global PMIs and Factory Orders also printed downbeat outcomes and pushed back the Fed hawks while weighing on the US Dollar.

On the other hand, multiple Chinese state banks including the Industrial and Commercial Bank of China, Bank of China and Construction Bank cut their benchmark rates. The same raises speculations that the Dragon Nation’s central bank, namely the People’s Bank of China (PBOC), will also cut the rates, which in turn fuelled hopes of more credit generation and demand for Oil from China.

Further, the fears of China’s market intervention also favored the WTI bulls as PBoC Vice Governor said, “We have confidence, conditions and capacity to maintain stable operations of the FX market.” On the same line was Li Yunze, Director of China's National Administration of Financial Regulation, who also made upbeat remarks on the Chinese economy as he said, “Economy still recovering,” while adding that demand will be boosted.

Amid these plays, the S&P500 Futures struggle for clear directions even as Wall Street closed with gains.

Moving forward, China’s inflation gauges for May, namely the Consumer Price Index (CPI) and Producer Price Index (PPI), will gain major attention due to the Dragon Nation’s status as one of the biggest Oil consumers. The forecast suggests that the headline CPI will improve to 0.3% YoY in May versus 0.1% prior whereas the PPI could drop further to -4.3% YoY from -3.6% previous readings. Given the mixed outlook, the WTI traders will look for any surprises for major reaction.

Technical analysis

Repeated bounces off the 10-DMA support of around $71.00 keeps the Oil buyers hopeful.