Oil sinks to 4-month low at $42.50

WTI crude oil extended its recent downslide and tumbled to a fresh three-month low on Tuesday to currently trade around $42.50 region.

The ongoing slump in crude is on the back of renewed worries of a global supply glut after last week's US oil rig counts showed continuous rise in US oil-drilling activity. 

Adding to this, deteriorating investor risk appetite for riskier assets is further contributing to the ongoing slide in the black gold. Moreover, buoyant sentiment surrounding the US Dollar has also been weighing on dollar-denominated commodities - like oil. 

Oil traders will now focus on this week's API data on US stockpiles, later during NY trading session on Tuesday, ahead of Wednesday's official data, which would provide fresh cues over oil supply-demand dynamics.

However, Wednesday's FOMC decision would provide fresh impetus for the greenback and would eventually determine the commodity's near-term direction.

Technical levels to watch

On a sustained weakness below $42.50, the commodity seems to drop below $42.00 handle towards testing $41.75 support, marked by 38.2% Fibonacci retracement level of $26.04-51.64 up-swing. On the flip side, any attempts of recovery now seems to confront resistance around $43.00 round figure mark, above which the commodity is likely to witness additionally up-move towards its next major resistance near $44.00 mark.