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Crude Oil Prices Extend Lower Amid Weaker US and Chinese Data


MongiIG

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CRUDE OIL PRICE OUTLOOK:

  • Crude oil prices fell for a third day after China reported disappointing retail sales and industrial production figures
  • The University of Michigan consumer sentiment index plummeted to a decade low of 70.3, weighing on demand outlook
  • WTI is testing trendline support, with sentiment tilting to the downside

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Crude oil prices extended lower during Monday’s APAC mid-day session, marking a three-day decline of 2.35%. The release of poorer-than-expected Chinese industrial production and retail sales figures weighed on energy prices, showing that the world’s second-largest economy is struggling to maintain growth momentum amid viral resurgence. Meanwhile, the University of Michigan said its preliminary consumer sentiment index plunged to 70.2 in early August, marking a sharp pullback from 81.2 in July. This is also the lowest reading observed in a decade, pointing to a slowing recovery and dampening the energy demand outlook.

In China, the growth rate of industrial production moderated to 6.4% YoY in July, marking a 4th consecutive monthly decline (chart below). This also missed market expectations of a 7.8% rise. Retail sales growth declined to 8.5% from 12.1% a month ago, falling sharply below a baseline forecast of 11.5%. This suggests that measures to curb the Delta variant and a flood in Henan province have had greater-than-expected impacts on consumer spending and production. As a result, crude oil prices declined, and haven-linked assets climbed.

China continued to adopt tight travel restrictions and impose lockdowns in areas where Covid-19 infections were found. The National Health Commission (NHC) reported 30 new locally transmitted coronavirus cases on Saturday, the lowest daily total in two weeks. This presented a silver lining for putting the pandemic under control, yet the authorities may continue to adopt tight measures to prevent resurgence.

China Industrial Production – Past 12 Months

Crude Oil Prices Extend Lower Amid Weaker US and Chinese Data

Source: Bloomberg, DailyFX

Technically, WTI is oscillating within a “Wedge” as highlighted on the chart below. The upper and lower bound of the “Wedge” may be viewed as immediate resistance and support levels respectively. The trio of short-, medium- and longer-term SMA lines are sloping downwards, underscoring a downward trajectory. The MACD indicator is trending lower, underscoring bearish momentum.

WTI Crude Oil Price  Daily Chart

Crude Oil Prices Extend Lower Amid Weaker US and Chinese Data

 

Written by Margaret Yang CFA, Strategist for DailyFX.com. 16 August 2021.

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