Oil inter-market: More downside in play ahead of Jackson Hole Symposium?

Oil is seen extending its sell-off in the European session, having ended seven straight sessions of gains on Monday. Both crude benchmarks are seen tumbling nearly 3% so far this session.

The black gold set-off the week on a weaker footing as markets resorted to profit-taking, using the excuse of bearish US rigs count data, which showed that the rig count rose by 10 to 406 this week, the highest level since February 19, 2016.

While increased demand for the US dollar, triggered by strong rally in USD/JPY on Kuroda’s comments, further weighed down on the USD-denominated oil. More so, a sudden jump in the Chinese fuel product exports, as reported by the China customs is partly responsible for the latest leg lower in the commodity.

Oil accelerated losses over the last hour, despite a broad based US dollar retreat, as the risk-off sentiment resurfaced and crushed the appetite for risky assets such as the equities, oil etc. The CBOE volatility index (VIX), which measures the risk trends, jumped towards 13 handle, rallying +12% on the day. This suggests that risk-off persists at full steam across the financial markets.

Looking ahead, oil markets will closely monitor the USD price-action and weekly supply reports for further direction on the commodity, heading into the Fed symposium scheduled later this week.