Oil Prices Drop as Technical Resistance and Thin Summer Trad Oil prices experienced a decline as light summer trading volumes intensified pressure from technical resistance levels. Brent Crude settled at $77 while the West Texas Intermediate settled below $73 a barrel, capping last week’s rally driven by supply factors.
Despite briefly surpassing its 100-day moving average on Friday, the key level has acted as a barrier to further price gains. The thin trading flows characteristic of the summer season have contributed to choppy price movements and heightened market volatility.
Market Sentiment Influenced by Economic Concerns and Monetary Policies
Bearish sentiment in the oil market was further fueled by economic data from China indicating a potential deflationary scenario and warnings from mining company Rio Tinto Group about near-term economic challenges in the nation. Treasury Secretary Janet Yellen’s remarks acknowledging the possibility of a US recession also added caution to the market.
These factors have contributed to the mixed outlook for oil prices, as China’s economic recovery remains lacklustre and central banks pursue aggressive monetary tightening measures.
Market Outlook and Factors Influencing Oil Prices
The oil market has been rangebound since late April, influenced by China’s economic performance, monetary policies, and a solid US employment report. The Federal Reserve’s expected interest rate hike this month continues to create headwinds for crude prices. The upcoming monthly reports from the International Energy Agency and OPEC will provide further insights into the market. Speculators cut their bearish bets on the global benchmark and West Texas Intermediate crude indicates signs of strength, but the overall market outlook remains mixed.
Additionally, the US government’s decision to purchase 6 million more barrels of crude for the Strategic Petroleum Reserve highlights the ongoing efforts to replenish the nation’s supply buffer.