WTI declines to March lows amid doubts over future demand

• Challenges to global trade raise bars for future energy demand outlook.
• China data disappointment also weighs on prices.
• Geopolitical tensions between Iran and Iraq are in play.

With the US President Donald Trump intensifying global trade tension, WTI drops to March lows with a bottom about $55.60 while currency trading near $56.00 by the press time on early Friday.

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. Mr. Trump 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 (PMI) 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.

In addition to the political news reports concerning trade and the Middle East, traders may also have a busy day due to the economic calendar that has PMIs and personal income-spending data to entertain momentum lovers.

Technical Analysis

Failure to provide sustained downturn beneath February 04 highs at $55.73 guard the 50% Fibonacci retracement of the late December swing lows to recent 2018 highs at $54.50 while $58.00 and 4HR 20EMA at $58.40 seem to limit immediate upside.