CRUDE OIL PRICE OUTLOOK:
- Crude oil prices fell for a fourth dayamid viral concerns and worries about global recovery momentum
- China reported the lowest number of locally transmitted coronavirus cases on Monday, but tight restrictions remain in place
- US retail sales figures will be in focus today, followed by Wednesday’s FOMC meeting minutes
Crude oil prices extended lower during Tuesday’s APAC mid-day session, marking a four-day decline of 2.90%. Lingering viral concerns and poorer-than-expected US and Chinese data dampened the prospects of global energy demand, pulling oil prices down from July’s peak. US consumer sentiment unexpectedly plunged to a decade low of 70.2 in early August, showing that the stimulus-led economic recovery is losing some steam.
This puts today’s release of US retail sales figures in the spotlight. The market expects retail sales growth to drop to 0.3% MoM, compared to a 0.6% gain in June. Travel-related spending might have been adversely affected by the Covid resurgence. Further, vehicle sales may see a decline as consumers pulled back from spending online. Consumer spending accounts for around two thirds of the economy, therefore retail sales data is a key bellwether of economic growth.
Across the Pacific, China continued to adopt tight travel restrictions and impose lockdowns in areas where Covid-19 infections were found. The country reported disappointing retail sales and industrial production figures on Monday, underscoring a slowing economy. The National Health Commission (NHC) reported 15 new locally transmitted coronavirus cases on Monday, 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.
In Asia, emerging economics such as Philippines, Indonesia and Thailand are still struggling to fight the pandemic. Vaccination rates in those countries trailed behind developed countries and Asia’s average (chart below), casting a shadow over the energy demand outlook.
Covid-19 Vaccination Rates Among Major Asian Countries
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
— Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter