Crude Oil (WTI) Update: China Lockdowns, Global Rate Hikes Weigh on Oil

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CRUDE OIL (WTI) NEWS AND ANALYSIS

• Chinese lockdowns, OPEC supply cuts and US inventory builds align to send prices lower
• WTI crude oil - key technical levels analyzed
• EIA oil stock data at 16:00 BST – inventory build remains a possibility. Favors the current trend

CHINESE LOCKDOWNS, OPEC SUPPLY CUTS AND US INVENTORY BUILDS

The oil market continues to be determined by the dominant theme of demand destruction – a direct result of aggressive monetary tightening which is gaining traction globally. At 13:15 (BST) today, even one of the major dovish central banks, the ECB, is expected to announce a record rate hike of 75 basis points in an attempt to lower inflation. This week we have already seen a 50 bps hike from the Reserve Bank of Australia and a 75 bps hike from the Bank of Canada.

An opposing force to the steady oil decline is OPEC +, which agreed to cut supply for October in an attempt to stabilize oil prices. Up until this point, the organization had attempted to increase the supply of oil to calm surging oil prices but now the biggest threat to the group is declining oil prices along with declining profitability.

Yesterday US API crude stocks surprised the market with a massive inventory build of 3.645M when the expectation was a drawdown of 733k which helped keep prices suppressed after declining earlier in the day.

China’s extended lockdown of Chengdu for the majority of its 21 million inhabitants weighed on oil prices and as this is likely to have further ramifications of China’s economic growth this year. China is the world’s largest exporter and a slowdown in domestic growth is likely to affect major trading partners.

 

WTI CRUDE OIL - KEY TECHNICAL LEVELS

Sep 8, 2022 | DailyFX
Richard Snow, Analyst