WTI plunges 4% on recession fears mounting, threatening to dampen demand

• WTI drops from daily highs of $86.40s to $82.20s on Tuesday.
• Chinese economic indicators remain delayed, with no rescheduling assigned by the government.
• The US will release oil from its SPR reserve to keep gasoline prices down.

The US crude oil benchmark, also known as Western Texas Intermediate or WTI, dived more than 3% on Tuesday amidst a risk-on impulse on fears that a global economic slowdown might dent oil’s demand. At the same time, the delayed Chinese GDP release weighs on investors’ moods. At the time of writing, WTI is trading at $82.69 per barrel, losing more than 3%.

WTI drops on fears of a global economic slowdown

US equities are trading in the green, supported by earnings. The delay of important Chinese data weighs on WTI traders’ mood, as speculation that growth could have weakened means less demand for black gold. Also, extending its Covid-19 zero-tolerance program might hurt the development of the world’s second-largest economy.

In the meantime, according to Reuters, the US Biden administration plans to sell additional oil from the Strategic Petroleum Reserve (SPR) as the White House tries to control gasoline prices before November’s mid-term elections.

Meanwhile, on Tuesday, OPEC’s secretary general Haitham al-Ghais said that the cartel unanimously decided to cut oil output to prevent a crisis and stem a tide of volatility.

“With macro-economic headwinds forecast for the months ahead and the very real potential for a global recession, which some might say has already started in some parts of the world, there was a consensus amongst the ministers of the need to act now and prevent a crisis later on,” he added.

WTI Price Analysis

WTI is neutral-to-downward biased, as shown by the daily chart. On Tuesday, prices tumbled below the 20-day EMa, extending its losses as sellers eye $80.00 per barrel, which is likely to happen as the Relative Strength Index (RSI), crossed below 50, with enough room before reaching oversold conditions. Therefore, WTI’s first support would be the S3 daily pivot at $82.08, followed by the $81.00 mark, ahead of the S4 pivot point at $80.83, and then the $80.00 mark.