WTI drops over 2% to test $70 on risk aversion, US Gulf output
- WTI risks losing the $70 mark amid China Evergrande woes-led risk aversion.
- Oil prices are also hurt by expectations of US Gulf oil output returning to markets.
- Stronger US dollar to keep the bearish pressure intact ahead of oil supplies reports.
Having faced rejection at $73, WTI (NYMEX futures) extends its losing streak into a third straight session on Monday.
WTI at the mercy of risk sentiment
At the time of writing, WTI loses nearly 2.50% on the day, attacking the $70 level, as a risk-off wave has engulfed the financial markets amid concerns over a potential default by China’s Evergrande.
The fears looming over the troubled Chinese property developer have ignited global slowdown concerns, which, in turn, weighs on the demand prospects for oil and its products.
Amidst risk-aversion and Fed’s tapering expectations, the US dollar stands tall at monthly tops, making the greenback-denominated WTI expensive for foreign buyers.
Exerting additional downward pressure on oil prices was a rise in US oil rigs count and expectations of returning US Gulf oil output after the two hurricanes.
As of Friday, 23% of US Gulf of Mexico crude output, or 422,078 barrels per day, remained shut, Reuters reported, citing the Bureau of Safety and Environmental Enforcement.
Attention now turns towards the weekly US crude stockpiles data due to be published later in the week for fresh trading incentives.
However, the US Federal Reserve (Fed) monetary policy decision will be the main event risk this week for dollar trades, eventually impacting WTI prices.
WTI technical levels
“In a case where WTI drops below $69.60, the bearish momentum can aim for the monthly low surrounding $67.00, also including 50% Fibonacci retracement of August-September upside. On the contrary, a downward sloping resistance line from last Wednesday, near $72.10, challenges the WTI recovery moves ahead of the monthly peak surrounding $72.90,” FXStreet’s Analyst, Anil Panchal, notes.
WTI additional levels to watch