Crude oil under pressure from China concerns but bears face headwinds from significant technical supports
WTI oil remains at the back foot and keep pressuring pivotal supports at $80.90/66 (20DMA / Fibo 23.6% of $67.02/$84.87) where pullback from new 2023 high ($84.87 of Aug 10) faced increased headwinds.
Oil prices came under increased pressure from weaker than expected Chinese data, which signaled that post-Covid recovery of the world’s second largest economy, and the biggest oil importer is not moving at desired pace and threatening that economic growth may not meet its 5% target this year.
Growing fears that slowing China’s economic growth would seriously hurt global demand, weigh on oil prices and counter efforts of top oil producers Saudi Arabia and Russia to support oil prices by further reducing the output.
On the other side, US crude stocks dropped by 6.2 million barrels (American Petroleum Institute report released on Tuesday) last week, almost three times more than expected, pointing to still strong demand in the US, with market focus turning to today’s crude inventories report from International Energy Agency (-2.32 mln bls f/c vs 5.85 mln bls build last week).
Technical picture on daily chart is weakening as 14-d momentum is in a downtrend and approaching the boundary of negative zone, pointing to growing risk of further easing, as traders collect profits from the latest $67.02/$84.87 rally.
However, fresh bears require clear break of pivots at $80.90/66 and $80.00 (psychological) to generate stronger bearish signal for attack at next key supports at $78.68 (Aug 3 trough) and $78.05 (Fibo 38.2% of $67.02/$84.87) break of which will signal reversal and open way for deeper correction of $67.02/$84.87 rally.
Caution on repeated failure to clearly break $80.90/66 pivots, which would put near-term bears on hold, but to keep negative bias while the price action remains under broken 10DMA ($82.42).
Res: 82.00; 82.42; 83.07; 83.80
Sup: 80.39; 80.00; 78.68; 78.05