WTI drops back to test $ 73.50, US drilling increases weigh

• Expectations of tighter markets negated by US drilling increases.
• Stalled USD selling also caps the upside, as attention turns towards the US weekly crude supplies.

WTI (oil futures on NYMEX) caught a fresh bid-wave in Asia on improved risk sentiment and reached fresh two-day tops at $ 74.23 before reversing sharply in the European trading to near the mid-point of the 73 handle.

The black gold turned negative, as oversupply worries returned to markets amid an increase in the US rigs counts, as per the data published by the Baker and Hughes Oilfields services firm last Friday. The US energy companies last week increased the number of rigs drilling for oil by five to 863, up 100 year-on-year.

More so, the stalled sell-off seen in the US dollar across its main competitors also collaborated to the latest leg down in the prices. However, the downside appears cushioned amid expectations of tighter markets, in the wake of looming supply disruption threats from Venezuela, Libya and Iran.

Also, lingering US-China trade tensions continue to underpin the sentiment around the barrel of WIT. Looking ahead, traders eagerly await the US weekly crude supplies data due on Tuesday and Wednesday for fresh direction.

WTI Technical Levels:

Resistances: $ 74.05 (classic R1/ Fib R1), $ 74.76 (July 4 high), $ 74.90/75 (July 5 high).

Supports: $ 73.39 (classic S3), $ 72.62 (June 2 low), $ 72.00 (round number).