Last week, oil futures managed to eke out a small gain after a 4-week losing streak, thanks to hurricane disruptions. However, concerns about demand in China are escalating, following negative data releases from the country. Investor worries are mounting as demand growth struggles to keep up with supply growth, prompting oil agencies like the International Energy Admiration and OPEC to lower their demand growth forecasts.
China and the Eurozone are among the key regions facing economic weakness. While WTI managed to close higher last week, the possibility of a downward trend looms as prices test crucial resistance levels amidst China’s weakening data.
Weak Chinese Data Raises Demand Concerns
In August, China’s industrial production grew at a slower pace than expected, while fixed asset investment growth hit its lowest point of the year. Home prices also saw a decline, indicating a challenging economic environment. Additionally, Chinese refiners processed significantly fewer barrels of oil in August compared to previous months, signaling a drop in oil demand.
Rising Supply: Rig Counts Surge
Although OPEC+ has postponed an oil output increase, rising drilling activity in the US suggests a potential surge in supply. The recent uptick in rig counts could lead to more oil production, contributing to an oversupply in the market. Speculators are turning bearish on the oil market, anticipating further price declines.
WTI Technical Analysis and Trade Ideas
WTI’s recent price movements indicate a bearish trend, with lower highs and lows. The current resistance levels could lead to a fresh drop in prices, with the next target below being the May 2023 low. Short-term rallies may present selling opportunities until a clear trend reversal occurs.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should evaluate risks before making any investment decisions.