Crude Oil Prices Hit 2-Week Lows; how to trade, key levels to watch today? | commodities

OPEC+ production rising

According to the Energy Intelligence report, crude oil production from all 22 OPEC-plus members rose by 170,000 barrels per day in July to 41.04 million b/d, the highest level since March. For the 18 members with an output quota, output was 34.17 million b/d, up 190,000 b/d from June.

A rise in Russian crude output is negative for oil prices after Russia’s Energy Ministry reported last Friday that Russian July crude output was 9.045 million bpd, about 67,000 bpd above its agreed output target with OPEC+.

Weakening Chinese demand

China reported a 3 percent drop to 42.3 million tonnes, or 9.97 million barrels per day, in July from a year ago, the lowest level since September 2022. Demand, meanwhile, fell 12 % compared to a month ago. January-July imports totaled 317.8 million tonnes or 10.89 million barrels per day, down 2.4%.

China’s oil demand contracted for the third month in a row, driven by a drop in industrial inputs. Construction activity, unsurprisingly, remained weak. New housing starts fell 23.2% year-over-year (YoY) and housing completions fell 21.8% year-over-year. Real estate investment remained by far the strongest, down 10.2% from a year earlier, and industry growth moderated to 5.1% year-on-year in July, down from 5.3% on year in June. Industrial production was one of the key drivers of growth in the first half of 2024, but momentum appears to be waning in the second half of the year.

US request to reduce

US oil refiners anticipate a slowdown in US oil demand due to a slowdown in economic activity. The unemployment rate is at 4.3% and labor market employment has seen weaker hiring since July 2021, indicating hay days ahead. Signs of weaker US gasoline demand have prompted several US refiners to cut refining operations, a drag on crude oil prices.

Crude oil outlook

We expect further price moderation as, despite the geopolitical rift, WTI prices have held above $80. Overall, crude oil prices are likely to remain within their well-established but narrowing range, with Brent between $75 and $85 and WTI between $72 and $83.

The biggest downside risk remains OPEC+, as a rise in production could affect the current fragile sentiment, while geopolitical events and low speculator participation are the biggest potential factors for a pause in growth.

WTI Crude Oil October: Support: $72, Resistance: $76

First publication: August 20, 2024 | 10:52 AM IST