Oil extends losses for a 4th day. Is there more downside to come?

Oil moves lower for a fourth day as COVID cases and China slowing growth concerns weigh. OPEC+ don't see the need for additional output in H2 beyond that already agreed.

Energy 3

Crude oil extends losses

Crude oil remains under pressure, extending losses for a fourth straight day. Oil trades down around 10% so far this month after gaining around 40% in the first 6 months of the year. 

Whilst optimism surrounding the demand outlook drove oil prices higher across the first half of the year concerns over rising delta cases and the slowing economic recovery in China, the world’s second largest consumer of oil. After a stellar first half, oil is looking vulnerable. 

Chinese retail sales and industrial production were softer than expected on Monday, highlighting the impact that tougher covid restrictions are having on the Chinese economy. Adding pressure to oil prices, Chinese oil demand slumped 2.3% as daily crude processing in July fell to its lowest level since May 2020. 

Covid cases are on the rise in China, where pandemic restrictions have been tightened. Japan is also set to extend its state of emergency widen restrictions to include more prefectures whilst cases were also substantially higher in Australia. 

Offering some support to oil prices were comments from OPEC+ yesterday. In response to US President Biden’s call for further output, OPEC+ said that they do not consider that additional supply, above the already agreed increase of 400,000 bpd, was necessary in the second half of the year. 

 Learn more about trading oil 

Where next for crude oil prices? 

WTI crude oil trades lower for a 4th day. A close below the 100 dma combined with the RSI in negative territory and pointing lower suggests that there could be more downside to come.  

Sellers will need to break below the rising trendline support at 65.70 in order to test support at 65.00 the July low. 61.50 the May could also offer support. 

On the upside, buyers need to close above the 100 dma and descending trendline resistance which could prove to be a tough nut to crack. Beyond here, 69.30 last week’s high and 70.30 the August 4 high could offer some resistance. 

How to trade with City Index

Follow these easy steps to start trading with City Index today:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade.

Build your confidence risk free

More from Crude Oil

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.