- West Texas Intermediate crude prices have extended their downside to YTD lows.
- We have sen a series of weak data from the US, causing a demand-side concern in the sector.
West Texas Intermediate crude prices have extended their downside all the way into the $50 handle, tracking the gloom and doom sentiment as US stocks extend their losses in the worst start of a fourth-quarter since the Global Financial Crisis.
WTI is currently trading -1% having travelled between a high of $52.91 and $50.97 on the day while futures closed in the red for their eighth straight daily decline and closed at their lowest in two months. WTI crude for November delivery on the New York Mercantile Exchange closed down $1.21, or 2.3%, at $51.43 a barrel, extending the losses of 1.8% the prior day following the Energy Information Administration reporting the unexpected 3.1 million barrel rise in U.S. crude supplies.
The US is not isolated to a global growth slowdown
We have sen a series of weak data from the US which is indicating to markets that the US is not isolated to a global growth slowdown, raising demand concerns in the sector. Analysts at TD Securities explained that “while the prospect of lower demand growth and supply stability is keeping the market comfortable in looking past the risks of further disruptions, for now, the market is becoming increasingly concerned that while further cuts may be needed, it could be difficult for Saudi to persuade its allies to cut more when the cartel meets in December.”
“Indeed, ABS acknowledged concerns about recessionary forces but continues to believe that they are being driven by negative expectations, with the IEA and the cartel still expecting 2020 demand growth to pick up significantly. Meanwhile, CTAs have increased their short positions across the energy complex as prices send firming downside trend signals which further fuel the bearish sentiment.”
WTI levels
The price of WTI came in a stone’s throw away from a full retracement to the year’s lows around 50.50 having broken the key support barriers in the trendline support and the confluence of the 200, 50 and 20-daily moving averages as well as a break of the 78.6% Fibonacci level (a reenactment target of the August rally). A break below the 50 handle opens the Nov 2018 lows at 49.39 guarding risk to the 18th Dec lows at 45.77 aheda of the dec double bottom lows below 42.50.
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