WTI extends decline below $55, attention shifts to weekly API stock data

• Dismal demand outlook continues to weigh on crude oil.
• Market sentiment turns sour in second half of day.
• Tensions remain high in Middle East, limiting losses.

Concerns over the negative impact of a prolonged US-China trade conflict on the global economy and crude oil demand continue to weigh on crude oil prices on Tuesday. Following a recovery attempt, the barrel of West Texas Intermediate met resistance at $55.40 earlier today and reversed its direction. As of writing, the WTI was down 1% on the day at $54.40.

Eyes on US-China trade war, Middle East

Although reports of China taking steps to limit yuan's devaluation earlier today helped the market sentiment improve, the lack of positive developments around the trade war made it difficult for crude oil to take advantage of the risk-on atmosphere. In fact, according to the Washington Post, US President Donald Trump is ignoring his aides and "going it alone" in the trade dispute with China.

The negative shift in the risk-appetite can also be seen in the 10-year US Treasury bond yield retracing its daily rally and Wall Street's main indexes erasing the opening gains. 

Meanwhile, Iranian President Hassan Rouhani earlier today called upon the US to lift all the sanctions if they want to hold talks and called a war with Iran "the mother of all wars," suggesting that the tension is likely to remain high in the Middle East, which could cause more supply disruptions and allow crude oil limit its losses.

Later in the post-settlement trade, the American Petroleum Institue's weekly crude oil stock report will be looked upon for fresh impetus.

Technical levels to watch for