Oil fell as light summer trading volumes compounded pressure from technical resistance levels.
West Texas Intermediate settled below $73 a barrel, putting a cap on last week’s supply-driven rally. The commodity briefly rose above its 100-day moving average on Friday, but the key level has since provided resistance to further gains. Meanwhile, brokers noted that trade flows remain thin, as is usual in the summer, which has kept price movements choppy.
With the exception of commodity trading advisors focusing on crude oil, oil trading has remained “extremely quiet”, resulting in a market “vulnerable to the flows seen daily and maintaining quite volatile high despite the lack of interest,” said Scott Shelton. energy specialist at ICAP.
Adding to bearish sentiment, Chinese data revealed its economy is on the brink of deflation, while miner Rio Tinto Group said it sees a number of short-term economic challenges in the country. Treasury Secretary Janet Yellen said the risk of a US recession is “not completely off the table”, adding an element of caution to the market.
Oil has been limited since late April, in part as China’s economic recovery and aggressive monetary tightening by central banks offset near-term tightness. A solid U.S. jobs report keeps the Federal Reserve on track to raise interest rates this month, keeping headwinds at crude oil prices. The International Energy Agency and OPEC will provide market snapshots when they release monthly reports later this week.
The outlook remains mixed as the market shows signs of strength and speculators reduce their bearish bets on the global benchmark and West Texas Intermediate crude. Brent rose 4.8% last week after Saudi Arabia and Russia promised to cut supply.
Meanwhile, the US announced on Friday that it will buy an additional 6 million barrels of crude for the Strategic Petroleum Reserve as the nation continues to replenish its supply stockpile. The purchases, planned for October and November, come as the stockpile is at its lowest point in 40 years.
Prices:
- WTI for August delivery fell 87 cents to settle at $72.99 a barrel in New York.
- Brent for September settlement was down 78 cents at $77.69 a barrel.
