Crude oil fell on Chinese data, will it continue to fall?

Crude oil fell on Chinese data, will it continue to fall?

Crude oil reacted negatively after mixed Chinese inflation data raised doubts about the world’s biggest crude importer, and sentiment was also fragile ahead of this week’s headline US inflation figures.

Crude oil prices fell slightly from last week as weak US consumer confidence and forecasts of high inflation fueled concerns about a slowing economy in the world’s biggest fuel consumer.

The readings were also preceded by data showing a build in U.S. gasoline and distillate inventories. 

Market was seen largely pricing out a risk premium from persistent geopolitical unrest in the Middle East, given that the Israel-Hamas conflict had so far caused minimal disruptions in crude supplies.

But recent losses in crude were also limited by speculation over sustained production cuts by the Organization of Petroleum Exporting Countries and allies, beyond an end-June deadline.

The prices came under in the pressure, as after the chinese inflation data for April, released over the weekend, showed a sustained recovery in consumer price index inflation by 0.2% from previous 0.1%, as constant monetary support from Beijing appeared to be supporting spending.

But Chinese producer price index inflation shrank for a 19th consecutive month, signaling that factory and business activity in the world’s biggest crude importer remained weak.

China’s oil imports in April had fallen from the prior month, albeit slightly. They were also largely flat from the same period last year, as the country grapples with a sluggish post-COVID economic recovery.

Looking ahead, the key U.S. inflation, PPI data for April is due on Tuesday, while the more closely watched CPI reading is due on Wednesday. Both numbers will have a strong impact on the prices.

Technical Outlook

The Crude oil prices retreated from the day’s high 6689 on Friday and settled at 6551, down by 0.83%. Compared to the previous day’s close of 6606.

On the above chart, prices struggled to cross its short-term consolidation range resistance 6710 and retreated again. Formation of a long bearish candle stick is also indicating for a weakness in near future. On the downside, a break below 6510 will open the door for next resistance 6420-6320.

Alternatively, any rise towards 6620-6630 likely to attract selling pressure with stop loss above 6710

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