Oil headed for a monthly decline in excess of 15%

After dropping to its lowest level since April 19, WTI crude oil staged a minor recovery to currently trade back around $41.00 mark.

Renewed worries of a global supply glut have been the key factor driving the black gold lower in the past couple of months. The commodity is now headed for a second consecutive week of steep declines to record a loss of over 15% for the month of July.

The commodity had failed to benefit from a broadly weaker US Dollar, on the back of intense selling pressure against the Japanese counterpart. However, a disappointing release of quarterly GDP number aggravated selling around the greenback and provided some respite for oil traders.

During the early part of the year, supply disruption worries - such as wildfires in Canada and militant attacks in Nigeria, helped oil prices recover from February's multi-year low level around $26.00/barrel mark to reach 8-month high level above $51 till June. With some of the factors already out of the way, fears of a global oversupply has resurfaced. This now seems to continue weighing on investor sentiment and might restrict any swift recovery for the commodity.

Levels to watch

On the downside, 200-day SMA near $40.10 would be key support to defend. On the flip side, momentum above session high resistance near $41.20 now seems to confront strong resistance near $41.70-80 area.