Crude Oil Price Update – Market Rebounding from Worries Over China Demand

U.S. West Texas Intermediate crude oil futures are trading lower but stable late in the session on Monday after recovering from a steep early setback. The price action suggests traders are nearly balanced on their assessment on a possible drop in demand from China and ongoing concerns over tight supply.

After a promising finish on Friday, the market was pressured earlier in the day by news that China had discovered its first case of a highly transmissible Omicron subvariant in Shanghai that could lead to another round of mass testing, which would hurt fuel demand, according to Reuters.

At 17:55 GMT, September WTI crude oil is trading $100.90, down $0.63 or -0.62%. This is up from an intraday low of $97.94. The United States Oil Fund ETF (USO) is at $78.20, down $0.34 or -0.43%.

In other news, investors dumped petroleum-related derivatives last week at one of the fastest rates of the pandemic era as recession fears intensified.

According to government data, hedge funds and other money managers sold the equivalent of 110 million barrels in the six most important petroleum-related futures and options contracts in the week to July 5.

Short-Term Outlook

Trader reaction to the 50% level at $101.73 is likely to determine the direction of the September WTI crude oil market into the close on Monday.

Bullish Scenario

A sustained move over $101.73 will indicate the presence of buyers. If this creates enough near-term momentum then look for an acceleration into the short-term retracement zone at $105.13 to $108.19. This is the last potential resistance before the main top at $111.14.

A trade through $111.14 will change the main trend to up.

Bearish Scenario

A sustained move under $101.73 will signal the presence of sellers. This could create the momentum needed to extend the selling into the Fibonacci level at $97.87.

A failure to hold $97.87 will indicate the selling pressure is getting stronger. This could lead to a retest of the main bottom at $92.18. A trade through this level will reaffirm the downtrend.