Steep losses in the global equity space as investors continue to fret about central bank tightening, sky-high inflation and slowing global growth weighed on crude oil markets on Monday. WTI was last trading just over 3.5% lower on the day in the upper $106.00s per barrel, after reaching as high as the mid-$111.00s last week. But technicians noted that, as long as WTI can remain above its 50 and 21-Day Moving Averages in the $103.40 and $105.10 areas respectively, the recent uptrend that has been in play since the last week of April should remain in play.
New evidence of demand weakness in China is another factor cited by analysts as weighing on crude oil prices on Monday. Chinese trade data released during the Asia Pacific session showed that, while imports were up 7.0% MoM in April, they were still down 4.8% YoY for the first four months of the year. Meanwhile, Saudi Arabia lowered its Official Selling Price for its Arab Light grade for delivery in June, which markets typically interpret as a sign of weaker demand. The country’s two largest cities, Shanghai and Beijing, continue to face varying degrees of lockdown as Chinese authorities continue the struggle to adhere to their zero-Covid-19 strategy.
Crude oil traders also remain focused on geopolitics as the EU nears a deal on an embargo on Russian oil imports. Such an embargo, the current proposal for which would end nearly all EU purchases of Russian crude within a few months, is likely to cause a further decline in Russian output, strategists have noted, which is likely to keep WTI supported above $100 for now. EU 27 nations need to agree unanimously on any such oil embargo deal and it may take a few more days to get reluctant countries such as Hungary to sign up.
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