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.
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).
This report has been prepared by AC Markets and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by AC Markets personnel at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.