Oil’s momentum fades

Oil prices fell overnight as the International Energy Agency did an about-face from last month and lowered its global consumption forecasts. The main driver, of course, has been the lightning-fast spread of the delta-variant virus across the globe.

Brent crude fell by 0.60% to $71.15 a barrel, and WTI fell by 0.62% to $68.80. Asia has continued pushing oil lower, spurred by the small but persistent spread of Covid-19 cases across China, with fears of mass lockdowns. Also, the partial closure of its two busiest ports as part of virus containment measures. Brent crude has fallen 0.50% to $70.80, WTI by 0.52% to $68.55 a barrel.

With the respective relative strength indexes (RSIs) back into neutral territory from oversold, the technical picture now swings back to negative for both contracts. Notably, Brent crude and WTI have failed ahead of resistance at $72.00 and $70.00 a barrel, respectively. Brent crude is in danger of breaking nearby support at $70.70 a barrel, signalling further losses to its 100-DMA at $70.15 initially and possibly $69.00 a barrel. Similarly, WTI is in danger of giving up nearby support at $68.50 a barrel and testing its 100-DMA at $67.60, potentially extending to $66.60 a barrel.

Continued US Dollar strength won’t help oil’s cause either, but the sudden about-face by the IEA has shaken nerves and capped the oil rally, bringing home the reality of the impact of the delta-variant. China concerns will continue to cap oil prices until New York arrives, and if the situation there worsens over the weekend, or Monday’s data is soft, oil could well be in for a torrid start next week.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes.

He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays.

A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others.

He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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