- WTI dropped 0.95% as China’s rate cut and push for increased lending reflect a slowing economy.
- Saudi Arabia’s July oil shipments to China see a significant 31% decline, adding to the bearish sentiment.
- US rig count decreases, hinting at potential supply tightening, which could provide a floor for WTI prices in the near term.
Western Texas Intermediate (WTI), the US crude oil benchmark, posted losses of 0.95% on Monday as China’s economic woes weighed on oil prices. Uncertainty from the US Federal Reserve (Fed) direction on rates favors the greenback, a headwind for US Dollar (USD) denominated assets. WTI is trading at $80.58, down 0.95%.
Despite output cuts from Saudi Arabia and Russia, China’s economic concerns and a resilient US Dollar weigh on crude oil prices
WTI extended its losses despite the People’s Bank of China (PboC) cutting rates by ten basis points in efforts to propel an economy that is continuing to slow down. At the same time, government officials and PboC members urged banks to increase loans.
In the meantime, Saudia Arabia and Russian crude oil output cuts cushioned the WTI drop. However, Saudi Arabia’s July oil shipments to China plunged 31% from June, as revealed by China customs data.
Data supplied y Baker Hughes showed the number of active rigs fell by 4 to 520 in the last week. Supply tightening could keep WTI prices from falling sharply, as noted by ING analysts. They said, “The US has lost 107 oil rigs since early December, and it is not too surprising that this reduced drilling activity means that oil production growth forecasts for later this year and through 2024 are looking relatively modest.”
WTI Price Analysis: Technical outlook
From a technical perspective, a golden cross is about to form, which would suggest that oil prices would continue to rally, with the year-to-date (YTD) high seen as the first resistance to challenge at $84.85, followed by the November 11 daily high at $90.08, ahead of the November 7 high at $93.73. Conversely, WTI’s first support would be $80.00 a barrel, followed by the latest swing low of $79.00.
WTI Price Action – Daily chart
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