- China’s central bank slashes key lending rates in response to slowing economic recovery, impacting global oil demand outlook.
- OPEC+ supply cuts by Saudi Arabia and Russia provide limited support as WTI retreats from YTD highs.
- Barclay’s revises China’s GDP forecast downwards, while WTI finds some relief in rising Chinese refinery throughput.
Western Texas Intermediate (WTI), the US crude oil benchmark, registers losses of more than 2%, as economic data from China portrays a slowing recovery, while the People’s Bank of China (PBoC) unexpectedly cut rates in key rates to stir the economy after the Covid-19 pandemic. WTI is trading at $80.49 per barrel, down 2.35%.
China’s disappointing Retail Sales and Industrial Production data weigh on crude; PBoC’s rate adjustments add to concerns
The latest round of economic data from China, with Retail Sales coming below estimates and Industrial Production disappointing market participants, spurred a reaction by the PBoC. China’s central bank cut its 7-day lending rates by ten basis points to 2.80% and applied the same measures to the overnight Standing Facility (SLF) rate from 2.75% to 2.65%.
That, alongside the supply cuts implemented by Saudi Arabia and Russia, which are part of the Organization of Petroleum Exporting Countries and its allies (OPEC+), have helped to lend a lifeline to oil’s rally, with prices reversing from year-to-date (YTD) highs.
The investment community’s concern about China’s meeting its 5% growth target in the year would likely pressure WTI’s prices. On Tuesday, Barclay’s cut China’s GDP forecast to 4.5%, citing the ongoing deterioration in the housing market.
Conversely, WTI’s fall was cushioned by the technical support level, and China’s refinery thought, climbing 17.4% in July from a year earlier. WTI traders’ focus shifts to US crude inventories.
WTI Price Analysis: Technical outlook
WTI reversed its course and dipped towards the 20-day Exponential Moving Average (EMA( at $80.47 per barrel, seen as first support, which, if broken, can pave the way for WTI to edge below $80.00. A breach of the latter will expose the August 3 daily low of $78.74, followed by the 200-day EMA at $77.89. Conversely, if WTI holds its ground above $80.00, that would be positive for buyers, which could re-test the year-to-date (YTD) high of $84.85, but firstly they need to break above the April 23 daily high of $83.49.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Leave a Reply