Crude oil prices retreat ahead of inventory reports as China virus cases remain elevated
Crude Oil, WTI, China, Iran, Inventory Data, Technical Outlook – Talking Points
- WTI and Brent crude prices fall in Tuesday’s Asia-Pacific trading
- US inventory data in focus in coming days as China’s Covid woes persist
- WTI Crude Technical Posture is Bearish Below Major Moving Averages
Recommended by Thomas Westwater
Introduction to Forex News Trading
Crude oil prices rose early in the week as a weaker US dollar and supply concerns supported buying. However, West Texas Intermediate (WTI) and Brent prices are falling in Asia-Pacific trading. A breakdown in negotiations between Tehran and Washington helped push prices up. Iran’s response to a proposal presented by the European Union disappointed Western leaders.
Iran wants an investigation by the International Atomic Energy Agency (IAEA) halted, but that is not an option for the US and EU. US Secretary of State Anthony Blinken said on Monday that a short-term deal was “unlikely”. This comment saw WTI cut its losses by almost a full percentage point. German Chancellor Olaf Scholz shared Mr Blinken’s sentiment. Israel has reportedly shared disturbing intelligence that Iran is very close to having enough weapons-grade uranium for a bomb.
Covid-19 lockdowns in China continue to weigh on the outlook for oil demand. This morning, the National Health Commission reported 1,048 new cases for September 12. Beijing is unlikely to soften its stance on containing the virus before October. That’s when President Xi Jinping is expected to get a third term. However, speculation that a gradual easing of restrictions would take place in the months following the National People’s Congress (NPC).
For now, traders are focusing on inventory data to be released over the next few days. On Tuesday, the American Petroleum Institute (API) will release crude oil inventory data for the week ending September 09. Data from the Energy Information Administration, which usually has more influence on the markets, is due out the next day. Analysts expect EIA data to show a 200,000 barrel reduction in crude oil inventories and a 633,000 barrel increase in distillate inventories.
Recommended by Thomas Westwater
How to trade oil
WTI Crude Oil Technical Outlook
Prices failed to clear the 61.8% Fibonacci retracement from the December 2021/March 2022 move after an intraday rise halted just below the simple moving average (SMA) on 20 days. The technical outlook for WTI is skewed on the bearish side, as prices remain below their major moving averages and the RSI and MACD oscillators are crashing below their midpoints.
If Monday’s strength returns and prices break above the 20-day SMA (green line), the psychological level of 90 poses a potential challenge ahead of the 50-day SMA (blue line). A move down would resume the larger downtrend. And a break below the September low at 81.21 is the worst-case scenario, which would take prices back to levels not traded since early January.
WTI Crude Oil Daily Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter