WTI limited below $90 amid global recession concerns
- WTI futures, capped below $90 after hitting lows at $88.40.
- Concerns about a global recession offset the impact of output cuts.
- The increase of COVID-19 infections in China is adding negative pressure on oil.
WTI futures’ recovery attempt from intra-day lows at $88.40 has been unable to extend past $90 on concerns that a global economic recession might slash demand for oil.
Economic concerns offset the impact of output cuts
Crude prices are retreating for the second consecutive day on Tuesday. Investors are increasingly concerned about the potential impact of a global recession combined with the sharp monetary tightening cycle assumed by most of the major central banks.
Furthermore, news about a sharp increase in COVID-19 cases in China’s major cities, following the Golden Week Holiday, have increased fears about a decline on oil demand. Local authorities have reportedly closed schools and tourist attractions, reviving lockdown memories.
The sourer investors’ mood has offset the bullish impact triggered by the production cuts announced by the OPEC+ last week. The club of the world’s largest oil suppliers agreed to reduce oil production by 2 million barrels per day, the largest cut since the outbreak of the COVID-19 pandemic, which sent crude prices skyrocketing.
WTI contained above support level at $88.40 area
From a technical perspective, WTI has broken the near-term bullish channel from September 22 low, to find support at $88.40, with next potential downside targets at $86.50 (mid-September highs) and $85.55 (October, 5 low).
On the upside, crude prices should regain the psychological level at $90.00 to build up bullish momentum and aim towards the 50-hour SMA at $91.50 ahead of $93.00 (intra-day high).
Technical levels to watch
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
