WTI drops below $54 on resurfacing recession fears

Crude oil prices came under strong selling pressure on Tuesday as the disappointing data from the US revived concerns over a recession and its potential negative impact on the global growth, which is expected to weigh on the energy demand.

After closing the previous day with a small 0.45% loss, the barrel of West Texas Intermediate today dropped to its lowest level in more than three weeks at $52.82 before staging a modest rebound. As of writing, the WTI was down 1.45% on the day at $53.98. 

PMI data raises growth concerns 

Earlier today, the data published by the Institute for Supply Management (ISM) showed that the economic activity in the manufacturing sector contracted for the first time in more than three years with the headline Purchasing Managers Index (PMI) slumping to 49.1 from 51.2 in July. "Respondents expressed slightly more concern about U.S.-China trade turbulence, but trade remains the most significant issue, indicated by the strong contraction in new export orders," the ISM said in its publication.

Furthermore, the IHS Markit's Manufacturing PMI came in at 50.3 to surpass the market expectation of 49.9, it still posted its lowest reading since September 2009 to reaffirm the loss of momentum in the sector. 

In the meantime, US President Donald Trump said that they were doing very well in the trade negotiations with China but warned China that the deal would get "much tougher" if they decide to wait to see the outcome of the 2020 election.

The weekly American Petroleum Institue (API) crude oil stock report, which is released on Tuesday under normal circumstances, will be published tomorrow ahead of the Energy Information Administration's (EIA) oil market report on Thursday.

Technical levels to watch for