Oil fades recovery gains on worries over global supply glut

WTI crude oil managed to stage a recovery on Monday, but lost its upside momentum and has now reversed majority of its recovery gains to currently trade around $43.30-40 band. 

A broadly weaker greenback, as measured by the overall US Dollar Index, assisted the black gold to recover from over one month lows touched in the aftermath of upbeat US CPI release on Friday. 

The commodity also benefitted from Venezuelan President Nicolas Maduro's comments that major oil producers might be nearing a deal on stabilizing the global oil supply at a closely watched meeting in Algeria next week. Adding to this, news on fresh military conflict in Libya over the weekend extended further support and helped the commodity to maintain its upbeat tone.

However, Friday's release of US rigs counts data that showed drillers added oil rigs for 11th week in the previous 12 has been fueling concerns over global supply glut and capped further upside for the commodity. In absence of any fresh market moving economic releases, the commodity would continue to take cues from the prevalent sentiment around the greenback and fresh news / update on oil output freeze agreement.

Technical levels to watch

Renewed weakness back below $43.00 handle, leading to a subsequent break through over one-month low support near $42.70, is likely to turn the commodity vulnerable to test sub-$42.00 mark with $42.40 acting as intermediate support. On the flip side, a follow through buying interest above $43.70 immediate resistance should pave way for an immediate up-move beyond $44.00 handle towards testing its next major resistance near $44.80 level.