Talking Points:

• WTI continues the corrective pullback to its lowest levels since late April.
• After a turbulent day where fears of an economic slowdown flooded commodities, bears take a break.
• In the gloomy market, OPEC’s Barkindo failed to persuade bulls.
• It will be crucial to keep an eye on the US ISM Services PMI, Fed Minutes, and weekly API inventory for clearer guidance.

In the Asian trading session today, WTI crude oil increased bids to 99 USD as it reverses the largest daily loss since March. As supply-crunch concerns were overwhelmed by fears of a recession, the black gold experienced the greatest loss while resetting the three-month low.

Growing concerns about a worldwide recession were added to rumours that China would recall the Covid lockdowns in order to drown the energy benchmark. After major central banks’ policymakers hinted at more difficulties for the world economy, the gloom grew worse. China announced their mass COVID testing along the same lines.

News that the US is willing to lift the tariffs imposed on China during the Trump administration as well as remarks from the Secretary-General of the Organization of the Petroleum Exporting Countries (OPEC) did not improve the bearish bias. Mohammad Barkindo, the secretary-general of OPEC, stated yesterday that there are numerous significant issues facing the oil market. “Refining capacity in OECD countries declined by 3.3 % globally in 2021,” added OPEC’s Barkindo per Reuters.

It should be mentioned that the news announcing the end of the strike by Norwegian oil and gas employees and expectations for increased oil production from Iran and Venezuela also placed downward pressure on the price.

However, the key drivers of the WTI’s greatest decline in several days were the strength of the USD and the pessimistic risk profile. Equities fell before making a modest rebound, while the US Dollar Index (DXY) increased to its highest levels in two years. Meanwhile, US Treasury yields recovered from a one-month low while inverting the yield curve between two-year and 10-year coupons.

The US ISM Services PMI for June and the Federal Open Market Committee (FOMC) Minutes will be crucial for future momentum. It will also be important to pay attention to API Weekly Crude Oil Stock for the week that ended on the 1st of July, which was previously -3.799M.

Technical Analysis

WTI bears remain optimistic about future drops due to a clear downside breach of an upward-sloping trend line from the 18th of February, which is currently around 101.30 USD at the time of publishing.