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Oil market could collapse further

Oil market could collapse further

In May, Brent lost over 10% and is now down nearly 20% from peaks, registered in late April. On Monday, prices extended the drop, touched $60.75 for the first time since February, and clings to the $61 handle.

Risk aversion continues to dominate in the global markets, including oil. Further escalation in the US-China trade tensions and Trump’s aggressive stance towards Mexico make investors worry about the global economy and price in a possible recession as the situation in the global trade continues to deteriorate.

In particular, there are now reports that Chinese regulators have launched an investigation into the US delivery company FedEx after receiving complaints from users. Besides, over the weekend, China issued a report that blamed the conflict on the Trump administration. Meanwhile, Trump threated to impose 5% tariffs on all imports from Mexico in response to migrant surge.

So, as there are no signs of relief for investors on the trade front, Brent remains vulnerable to further losses despite the oversold signals in the charts. Should the selling pressure persist, futures could challenge the $60 psychological level in the near term.