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The US bond markets have been screaming to risk asset classes, such as oil, that a recession is on its way and oil is behaving that it wants to go down.  They were  a touch higher into the Wall Street close overnight, with West Texas Intermediate crude up 0.40%, travelling between $55.35 and $56.70 bbls after stocks corrected sharply higher.

However,    the outlook for demand is in the driver’s seat. Yes, the Energy Information Administration  reported that U.S. crude supplies fell by 10 million barrels for the week ended August 23rd which was the largest one-week decline reported since the 10.8 million-barrel fall for the week ended July 19th, but amid a US-Sino trade wars which are  raising uncertainty about the future path for demand, oil is going to be in the firing line.  

Tariffs are set to come into the spotlight

“Tariffs are set to come into the spotlight as Unipec is said to attempt to resell US crude ahead of the imposition of 5% tariffs that is scheduled to take effect on September 01. With little trend in energy markets, amid these conflicting supply-demand signals, CTAs could be whipsawed for a while longer, as ebbs and flows in momentum signals prompt the algos to buy high and sell low, with prices largely remaining range-bound,” analysts at TD Securities explained, adding, “The energy bulls are gaining comfort as OPEC compliance to cuts is reported at nearly 160% “” suggesting the cartel is aggressively committing to curtail supply. That being said, this is not “new news” to the market which has become accustomed to deep cuts from OPEC despite WTI prices hovering in the $50-60/bbl range.”

WTI  levels

Despite the rally, the price has made another lower highs and is deteriorating in a broader view of the charts. The price is testing the GMMA band, the 200 -daily moving average and is above the    20-DMA. Staying with a focus on the downside until the 200-DMA is broken, bears can target a drop to the 52 handle and the 61.8% Fibo at 51.70 on the wide.