WTI tests prices below $40 on its pullback from $40.60 highs

• WTI futures reversal from $40.60 highs extends to levels below $40.
• Oil prices pull back as market sentiment sours on renewed coronavirus fears.
• Coronavirus concerns have offset optimism from upbeat macroeconomic data.

Front-month WTI futures are trading lower on Friday, testing prices below $40 after rejection at $40.60 area on Thursday. Oil prices are losing ground with revived COVID-19 fears overshadowing positive macroeconomic data.

Oil prices fall on concerns about coronavirus infections

The WTI barrel is losing nearly 1% so far on Friday after being rejected once again from levels beyond $40 although they are still on track to close the week in positive. The increasing number of coronavirus infections worldwide is raising concerns about a second wave of lockdowns that might curb demand for oil.

New coronavirus infections increased by more than 55,000 in the US on Thursday, a new daily record that suggests that the pandemic is far from solved and that it could still harm the economic recovery.

The increase of COVID-19 cases has offset market optimism triggered by the record rise on US Non-Farm Payrolls on Thursday and the unexpected decline on oil stocks last week, reported by the EIA. Beyond that, Chinese data released earlier today showed that the country’s services sector activity expanded beyond expectations in June.

WTI: Still caped below $40

From a technical point of view, WTI futures remain capped below $40.50 (Jun 24 high, Intra-day high) with next resistance areas at $41.61 (Jun. 23 high) and $44.00 (200-day SMA) On the downside, immediate support lies at $38.90 (Jun. 30 low) and below here, $37.00 (Jun. 17, 25 lows) and $34.34 (Jun.15 low).