Crude oil sharp decline resumes as investors focus on Chinese tariffs
|API estimates and lower inventories from EIA (-1.35 million barrels vs consensus: 2.16 million) for the week ending in 3. August along with US sanctions on exporting goods (ex oil products) failed to impress the market in a sustained way, with Brent Crude and West Texas Intermediate intraday prices reaching 74.65 and 69.17 before plummeting below 100 DMA.
Indeed, the focus is now turning to Chinese 25% duties on $ 16 billion energy products including gasoline, diesel and other oil-based products, a first move of the kind with regard to the energy sector. The decision will be effective in 23. August 2018.
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Accounting for 20% of total US oil exports (17.6 million barrels in May), China currently remains the largest importer of US crude oil, a trend that could drastically change in the coming periods as China’s large energy companies are ramping up production in an attempt to satisfy domestic demand at best.
Accordingly, the recent decline in oil prices seems overstated. The short-term bearish impact is expected to dissipate, as global energy demand remains robust. Trading below 50 and 100 DMAs, WTI is expected to rebound in the short-term, approaching the 68.50 range (along 23.6% Fibonacci retracement).
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