China’s economic woes resulted in a more than three per cent fall in crude oil prices. After hitting a multi-week high in the past week, prices dropped significantly as the lingering impact of weak economic data from China, the world’s biggest oil importer, offset tighter U.S. supply impact.
Brent crude futures fell to $84.90 a barrel, while U.S. West Texas Intermediate crude (WTI) slipped to $81.00 a barrel. On Tuesday, both benchmarks declined to their lowest level since August 8.
According to market sources quoting American Petroleum Institute data, the nation’s oil stockpiles decreased by around 6.2 million barrels last week. Compared to the 2.3 million decline analysts surveyed by Reuters, that was a significantly larger draw.
Prices came under pressure after China’s economic activity data for July was released, the retail sales, industrial output and investment figures remained below expected numbers. Which fuels concern over a deeper, longer-lasting slowdown in growth.
The July activity report has led some economists to warn that without additional fiscal stimulus, China, the largest oil importer in the world, may find it difficult to achieve its annual growth objective of approximately 5%.
Beijing lowered its key policy rates to boost activity, and some analysts are anticipating that it would soon enact other stimulus measures to jolt the economy and increase demand for commodities like oil.
Supply cuts by Saudi Arabia and Russia, part of the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies, have pushed up oil prices over the past seven weeks.
Technical Outlook
Crude oil retreated from the high of 7019 which was the highest level in this year. Prices gave up more than 3% from the high and continued trading down. Prices dropped towards the recent low of 6706 and traded at 6723.00.
On the above chart, prices traded below their 20 DMA and witnessed a gap-down opening today. Further, it has been noted that prices broke down Regression trend support of 6820. Which indicates bearishness in the near future. A break below 6720 will extend pressure and it could test 6620-6550 levels very soon.
Else, every rise towards 6850-6900 could attract selling pressure. On the upside, immediate resistance is seen at 6980-7020 and a fresh buy will expect only above it. And prices could test 7080-7150.00.
Later today, U.S. government data on inventories is set to release which may give near future direction. Further, US Fed meeting minutes are also in line which also has a strong impact on the oil prices.