WTI extends the drop towards $ 70, rising US rigs weigh

• Opposition to Iran sanctions, a surge in US drilling activity drags oil lower.
• Will falling in Russia’s oil output help limit the downside?

WTI (oil futures on NYMEX) fell further in the European session, as the bears now gear up for a test of the $ 70 threshold.

The corrective slide from 3.5 year highs extends into a second day today, as sentiment remains weighed down by the relentless rise in the US rigs count numbers, with the latest data showing an addition of 10 oil rigs in the week to May 11, bringing the total count to 844, the highest level since March 2015.

More so, the emergence of resistance from Europe and Asia to the US sanctions against major crude exporter Iran reduced concerns over tightening supplies, which further collaborated to the downside in the black gold.

However, the losses could remain capped amid the latest news of decreasing output from Russia’s largest oil producer, Rosneft. Reuters reported that Rosneft’s first-quarter oil output declined 1.2 percent because of the OPEC deal.

Meanwhile, subdued trading activity seen in the US dollar versus its main peers could also offer some respite to the bulls, as attention turns towards the US weekly crude supplies report due later this week for the next direction.

WTI Technical Levels

Jason Sen, Director at DayTradeIdeas.com offers his technical outlook on WTI: “WTI Crude bottomed exactly at support at 7050/40 as predicted. It is likely we will trade in a more sideways trend to ease overbought conditions this week. A break lower today targets 6990 before a buying opportunity at 6955/45. If you are long from support at 7050/40 you want prices back above minor resistance at 7085/95 to target 7125/30 & 7160/65 before the 7180/89 high. We could still work towards the 500-week moving average at 7300/7310 eventually, despite overbought conditions.”