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Crude Oil Prices on Shaky Ground Ahead of US Inventory Data as China Covid Cases Rise

Crude Oil Prices on Shaky Ground Ahead of US Inventory Data as China Covid Cases Rise

Thomas Westwater, Analyst

Brent Oil, WTI Crude Oil, China, Inventory, API, EIA - Talking Points

  • China’s handle on Covid questionable as cases remain high, US orders staff to leave country
  • EIA and API US crude oil inventory data in focus as traders weigh global economic pains
  • The WTI crude technical outlook appears bearish after breaking below a key trendline

Brent crude oil prices fell below $100 per barrel overnight as fears of an economic slowdown permeated further through markets. Those fears also drove WTI crude prices lower along with US equity indexes as well. The coordinated oil releases planned by the United States and International Energy Agency (IEA) are easing concerns over inadequate supply as major economies exit from Covid containment strategies.

However, Chinese cities, including the mega-city and financial hub Shanghai, continue to face government-imposed lockdowns as part of China’s “Covid-Zero” plan. While restrictions in Shanghai are starting to ease, the potential for outbreaks and subsequent lockdowns in other Chinese cities remains a real threat to oil and other demand-sensitive commodities.

China is under close watch for traders as daily case counts rise higher in Shanghai. The US State Department today ordered non-essential personnel to leave the country. Beijing’s policies surrounding Covid, including its policy of separating parents and children, were cited in a consulate advisory message. The move may indicate that the United States believes the situation may persist for some time.

Elsewhere, traders will be keyed into US inventory figures. Oil prices fell last week on a surprise inventory build, according to data from the Energy Information Administration (EIA). Tonight, the American Petroleum Institute will report crude stocks data for the week ending April 08. The EIA will follow up the following day with its own data. Analysts expect to see the EIA report a build of 1.36 million barrels. A bigger-than-expected number would likely provide a headwind to oil prices.

Crude Oil Technical Forecast

WTI crude prices broke through a trendline and the 50-day Simple Moving Average (SMA) overnight. The 100-day SMA and the 61.8% Fibonacci retracement level around the 88 mark may provide the next big level of support if prices extend lower. Bulls would aim to recapture the surrendered trendline and 50-day SMA on a rebound. The Relative strength Index (RSI) is moving lower below the center line.

Crude Oil Chart Daily Chart

wti crude

Chart created with TradingView

--- Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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